1995 (12) TMI 111 - AT - Central Excise

Appellants denied MODVAT Credit for duty-exempted inputs; Tribunal upholds decision.

The Tribunal held that the appellants were not entitled to avail MODVAT Credit for duty-exempted inputs and that the oral direction by the Supdt. of ... MODVAT Credit Issues:1. Erroneous availing of MODVAT Credit for duty-exempted inputs.2. Legality of oral direction by Supdt. of Central Excise for credit reversal.3. Suo motu restoration of wrongly reversed credit by the appellant.4. Jurisdiction of Supdt. of Central Excise in directing credit reversal.5. Legality of show cause notice under Central Excise Act, 1944.Analysis:The appeal pertains to the erroneous availing of MODVAT Credit by the appellants for duty-exempted inputs used in manufacturing MS rounds. The appellants wrongly took credit amounting to Rs. 1,62,99,939/- for a specific period. Subsequently, they reversed this credit based on an alleged oral direction from the Supdt. of Central Excise. The appellants sought a speaking order in this regard and later, suo motu restored the reversed credit, prompting the initiation of proceedings culminating in the impugned order.The primary contention raised by the appellants was the legality of the oral direction by the Supdt. of Central Excise to reverse the credit. The appellants argued that such a direction lacked legal authority and was made under official compulsion, rendering it invalid. They further claimed that their subsequent restoration of credit suo motu was justified, as the initial reversal was not legally mandated.Upon considering the submissions, the Tribunal found that the appellants were not entitled to avail MODVAT Credit for duty-exempted inputs, as per Notification 202/88. The Tribunal rejected the argument of official compulsion for the credit reversal, stating that the initial credit availed was incorrect and the subsequent reversal was appropriate. The Tribunal emphasized that there was no provision for the appellants to suo motu take credit under the Central Excise Act, 1944 or the MODVAT Scheme.In light of the above, the Tribunal held that the impugned order, issued following a show cause notice, was legally sustainable. The Tribunal distinguished a previous ruling cited by the appellants, concluding that the appellants were not eligible for MODVAT Credit and their suo motu restoration of credit was unjustified. Consequently, the Tribunal upheld the impugned order and dismissed the appeal, emphasizing the ineligibility of the appellants to claim MODVAT Credit in the given circumstances.