1997 (2) TMI 264 - AT - Central Excise

Dispute on Modvat credit recovery period clarified in appellate judgment

The case involved a dispute regarding the recovery of wrongly availed Modvat credit by a manufacturer of two-wheeler motor vehicles under Rule 57-I of the ... Demand - Modvat - Limitation - Computation of Issues:1. Interpretation of Rule 57-I of the Central Excise Rules regarding recovery of wrongly availed Modvat credit.2. Determination of the period of limitation for issuing show cause notice in the context of Modvat credit availed after specific dates.3. Applicability of Section 11A of the Central Excise Act to Rule 57-I of the Central Excise Rules.4. Comparison of judicial decisions regarding the interpretation of Rule 57-I before and after amendments.5. Analysis of the amended Rule's provisions for the period of limitation and commencement date.Analysis:1. The case involved a dispute regarding the manufacturer of two-wheeler motor vehicles availing Modvat credit on inputs falling under Chapter Heading 8711 of the Central Excise Tariff Act, 1985. The issue pertained to the period from 6-7-1992 to 20-7-1992, where a notice was issued to the manufacturer for the reversal of Modvat credit under Rule 57-I of the Central Excise Rules. The Assistant Collector confirmed the demand, which was partially set aside by the Collector (Appeals) on the ground of limitation, leading to the Department filing an appeal.2. Rule 57-I of the Rules, both before and after the amendment effective from 6-10-1988, dealt with the recovery of wrongly availed credit. The amendment introduced a provision for issuing a show cause notice within a specified period from the date of availing credit. The Department argued that the period of limitation should be reckoned from the date of filing the RT 12 return, but judicial precedents like Torrent Laboratories Pvt. Ltd. v. Union of India held otherwise, emphasizing the need for a show cause notice within a reasonable time frame.3. Cases like Asia Insulated Wires Pvt. Ltd. v. Collector of Central Excise established that the period of limitation for wrongful availing of Modvat credit after specific dates was governed by Rule 57-I. The starting point for limitation was deemed to be the date of availing Modvat credit, as per the Tribunal's decisions in various cases cited in the judgment.4. Various judicial decisions, including those from High Courts and Tribunals, were compared to understand the interpretation of Rule 57-I before and after amendments. The cases highlighted the necessity of considering the specific provisions of the Rule and the implications of amendments on the period of limitation for issuing show cause notices.5. The judgment emphasized that the amended Rule clearly stipulated the period of limitation from the date of availing Modvat credit, departing from the pattern of Section 11A of the Act. The deliberate amendments in 1988 and 1995 indicated the legislative intent to set the commencement date of limitation as the date of credit availing. The judgment concluded that the notice in the present case was barred by limitation based on the provisions of the Rule, leading to the dismissal of the appeal.