Assistant Collector's Order Review Prohibited; Clarification on Central Excise Rule 57H(3)

UPPER INDIA STEEL MFG. & ENGG. CO. LTD. Versus COLLR. OF C. EX., CHANDIGARH

UPPER INDIA STEEL MFG. & ENGG. CO. LTD. Versus COLLR. OF C. EX., CHANDIGARH - 1996 (82) E.L.T. 571 (Tribunal) Issues Involved:
1. Legality of the Assistant Collector's authority to review his own order.
2. Interpretation and applicability of Rule 57H(3) of Central Excise Rules.
3. Compliance with principles of natural justice in the revocation of Modvat credit.
4. Eligibility for transfer of unutilized credit balance under Rule 57H(3).

Issue-wise Detailed Analysis:

1. Legality of the Assistant Collector's Authority to Review His Own Order:
The appellants contended that the Assistant Collector could not review his own order granting permission to transfer credit to RG-23A account. The original permission granted by the Assistant Collector for the transfer of the credit was never set aside, and therefore, he could not review his own order. The tribunal found that the Assistant Collector, having allowed the transfer, could not review that decision and disallow the credit subsequently. The tribunal noted that the appellants had complied with the direction to debit the amount of credit taken by them in their RG-23A Part II account on transfer of the said amount from RG-23 Part II account. The tribunal concluded that the proceedings initiated in light of the Collector (Appeals)'s remand order were legally in order, but the correctness of the decision was remanded to the Assistant Commissioner for further consideration.

2. Interpretation and Applicability of Rule 57H(3) of Central Excise Rules:
The appellants argued that the transfer of credit was admissible under Rule 57H(3) of Central Excise Rules, 1944. The tribunal found that the Assistant Collector made an error in interpreting Rule 57H. The Assistant Collector had incorrectly concluded that the provisions of Rule 57H became ineffective after 31-3-1986 and could not take care of the situation. The tribunal clarified that Rule 57H(3) allowed for the transfer of credit from RG-23 Part II account to RG-23A Part II account for credit lying unutilized before the commencement of the Modvat scheme on 1-3-1986. The tribunal noted that the appellants had applied for the transfer of the balance of credit at the end of March 1986, and only the sum of Rs. 47,014.95 B.E.D. and Rs. 23,708.77 S.E.D. was eligible for such transfer.

3. Compliance with Principles of Natural Justice in the Revocation of Modvat Credit:
The tribunal observed that the Collector (Appeals) had originally set aside the Assistant Collector's letter dated 29-1-1987 for passing an appealable order after observing the principles of natural justice. The tribunal found that the refusal or recovery of the amount already allowed without issuing a show cause notice and without affording an opportunity to the appellant to put forth the plea was in violation of the principles of natural justice. The tribunal remanded the matter to the Assistant Collector for de novo consideration after issuing a show cause notice and granting a personal hearing to the appellants.

4. Eligibility for Transfer of Unutilized Credit Balance under Rule 57H(3):
The tribunal found that the appellants had a closing balance of credit in RG 23 Part II as on 28-2-1986 of Rs. 47,014.95 (B.E.D.) and Rs. 23,708.77 (S.E.D.). They took credit of Rs. 2,30,338.89 in March 1986, and the closing balance as on 31-3-1986 was Rs. 2,77,353.84 B.E.D. and Rs. 23,708.77 S.E.D. The tribunal concluded that only the RG 23 Part II balance of credit lying unutilized before the introduction of the Modvat scheme on 1-3-1986 was eligible for transfer to RG 23A Part II account. The tribunal remanded the matter to the Assistant Commissioner for de novo decision on the eligibility of the appellants to the benefits admissible under 57H(1) in respect of the inputs received in March 1986 and the benefit under 57H(3) for transfer of credit from RG 23 Part II account to RG 23A Part II account in respect of the credit lying unutilized before the commencement of the Modvat Scheme on 1-3-1986.