2000 (12) TMI 107 - HC - Central Excise

Court emphasizes correct Modvat Credit period, quashes erroneous decisions.

The court held that the erroneous classification by the Excise Authorities and the subsequent denial of Modvat Credit to the petitioner were unjust. The ... Modvat credit Issues Involved:1. Classification of HDPE/PP Woven Sacks/Tapes/Fabrics under the Central Excise Tariff Act.2. Eligibility for Modvat Credit.3. Impact of erroneous classification by Excise Authorities.4. Legal implications of amendments to Rule 57H of the Central Excise Rules, 1944.5. Discrimination in the application of Modvat Credit benefits.6. Validity of orders passed by the Assistant Collector, Collector (Appeals), and CEGAT.7. Relevance of the date of filing the declaration for Modvat Credit.Detailed Analysis:1. Classification of HDPE/PP Woven Sacks/Tapes/Fabrics:The petitioner, a limited company, engaged in manufacturing HDPE/PP Woven Sacks/Tapes/Fabrics, sought classification of its products under Chapter 39 of the Central Excise and Tariff Act, 1985, as articles of plastic. The Assistant Collector classified the products under Chapters 54 and 63 as textile articles, which had different duty rates and did not allow Modvat Credit.2. Eligibility for Modvat Credit:The petitioner could not avail Modvat Credit due to the classification under Chapters 54 and 63. Modvat, introduced in March 1986, allows credit for duty paid on inputs used in manufacturing final products, applicable to items under Chapter 39 but not under Chapters 54 and 63.3. Impact of Erroneous Classification by Excise Authorities:The erroneous classification by the Excise Authorities prevented the petitioner from availing Modvat Credit. The petitioner continued to pay duty under protest and did not claim credit on inputs, as the classification under Chapters 54 and 63 did not permit it.4. Legal Implications of Amendments to Rule 57H of the Central Excise Rules, 1944:Rule 57H was amended by Notification No. 20/89, deleting clause (ii) in sub-rule (1), which allowed credit for inputs lying in stock before filing the declaration but received after 1-3-1987. This clause was reinserted by a notification on 25-7-1991. The petitioner's claims for credit on inputs consumed between 1-3-1987 and 20-12-1989 were denied due to the amendment.5. Discrimination in the Application of Modvat Credit Benefits:The petitioner argued that other manufacturers of similar products had their claims allowed, while the petitioner's claims were denied, constituting discrimination. The petitioner sought the same treatment as other manufacturers who had benefited from the court's decision in similar cases.6. Validity of Orders Passed by the Assistant Collector, Collector (Appeals), and CEGAT:The Assistant Collector rejected the petitioner's claims for credit on inputs used in semi-finished/finished goods and consumed prior to 20-12-1989, only allowing credit for inputs lying in stock. The Collector (Appeals) and CEGAT upheld this decision, citing the amendment to Rule 57H and the timing of the petitioner's declaration.7. Relevance of the Date of Filing the Declaration for Modvat Credit:The petitioner's declaration was filed on 18-12-1989, after the amendment to Rule 57H on 5-5-1989, which deleted the relevant clause. The authorities argued that the petitioner was only entitled to credit for inputs lying in stock at the time of the declaration, not for inputs consumed earlier.Conclusion:The court held that the erroneous classification by the Excise Authorities and the subsequent denial of Modvat Credit to the petitioner were unjust. The court emphasized that the relevant period for considering Modvat Credit is the time when the inputs were consumed, not the date of filing the declaration. The court directed the competent authority to verify the records and pass appropriate orders in line with the law laid down in the case of Gilt Pack Ltd., ensuring that the petitioner receives the benefits of Modvat Credit for the relevant period. The orders passed by the Assistant Collector, Collector (Appeals), and CEGAT were quashed.