1997 (4) TMI 159 - AT - Central Excise

Tribunal Seeks High Court Clarification on Modvat Credit Application Procedure

The Tribunal referred the case to the High Court to clarify whether a separate application under Rule 57H(1)(A) was necessary for availing Modvat credit ... Modvat credit on inputs lying in stock - application under Rule 57H(1)(A) for availing Modvat credit - declaration under Rule 57G with dated acknowledgement - prior permission of the Assistant Collector for credit - verification of stock and duty paying documentsApplication under Rule 57H(1)(A) for availing Modvat credit - declaration under Rule 57G with dated acknowledgement - prior permission of the Assistant Collector for credit - A question of law exists whether a separate declaration or application under Rule 57H(1)(A) is necessary to avail Modvat credit on inputs lying in stock immediately before filing the declaration under Rule 57G, or whether declaration under Rule 57G showing such inputs is sufficient. - HELD THAT: - The Tribunal noted conflicting precedents treating prior formal application under Rule 57H as unnecessary where the stock position and duty payment could be verified, while other orders suggest an application under Rule 57H may be expected. Given these divergent views and the practical consequences of requiring prior permission, the Bench concluded that the legal question is of sufficient importance to warrant a reference to the jurisdictional High Court. The Registrar was directed to compile a statement of facts for the reference. The determination was not finally resolved on the merits by this Bench but was referred for authoritative adjudication. [Paras 5, 6]Formulated the point of law regarding the necessity of a separate Rule 57H(1)(A) application versus reliance on the Rule 57G declaration and referred the question to the jurisdictional High Court; registry directed to prepare a statement of facts.Final Conclusion: Reference to the jurisdictional High Court directed on the question whether a separate application under Rule 57H(1)(A) is required to avail Modvat credit on inputs lying in stock or whether the declaration under Rule 57G suffices; factual statement to be prepared by registry. Issues:Interpretation of Rule 57H(1)(A) regarding the necessity of an application for verifying stocks before seeking credit of duty paid inputs lying in stock.Analysis:The case involved M/s. Mahalaxmi Steel Rolling Mills Pvt. Ltd., a manufacturer of iron and steel products, who took Modvat credit without making an application under Rule 57H for permission to seek credit of duty paid inputs. The department alleged that the credit was wrongly taken, leading to a show cause notice. The ld. Collector (Appeals) allowed the appeal of the respondents, prompting the department to file an appeal before the Tribunal. The main contention was whether an application under Rule 57H(1)(A) was necessary for the Asstt. Collector to verify stocks before allowing credit, as the respondents had taken credit before filing the declaration under Rule 57G. The Tribunal's order was silent on how the Asstt. Commr. could reach a decision under Rule 57H without a formal application for credit by the respondents.The ld. DR argued that without a special request under Rule 57H, the verification of stocks and subsequent allowance of Modvat credit did not arise. He requested a reference to the High Court due to the significant legal issue involved. On the other hand, the ld. Advocate for the respondents cited Tribunal decisions where it was held that no prior permission was necessary for availing Modvat credit on inputs lying in stock.After considering various Tribunal decisions, the Tribunal found conflicting views on the necessity of a separate application under Rule 57H(1)(A) for availing Modvat credit. The Tribunal concluded that a point of law was involved, specifically whether a separate declaration under Rule 57H(1)(A) was required or if declaring inputs in the Rule 57G declaration sufficed. Therefore, the Tribunal deemed it appropriate to refer the case to the jurisdictional High Court for clarification on this legal issue.In conclusion, the Tribunal directed the Registry to prepare a statement of facts for reference to the High Court, disposing of the reference application accordingly.