TaxTMI 
TaxTMI 
TaxTMI 
2011 (8) TMI 593
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.... (2) Whether the extended period of limitation under the Rule 57-I(1) (ii) can be invoked when there is not even an allegation of fraud, misstatement, collusion or suppression with an intent to evade duty the Show Cause Notice? 3. The statement of facts, as given by the Tribunal are quoted as follows:- M/s Brooke Bond Lipton India Ltd. are engaged in the manufacture of packet tea falling under Chapter-9 of Central Excise Tariff Act, 1985 and took credit on the inputs for use in the manufacture of final product till 27th February, 1993 as tea was exempted from paying central Excise Duty with effect from 28th February, 1993 under Notification No. 2/93 dated 28th February, 1993. A Show Cause Notice dated 5th August, 1993 was issued to the Assessee under Rules 57-I and 57-E for reversal of credit amounting to Rs. 31,28,267 on the ground that the final product has been exempted from payment of duty. The party had submitted their defence reply vide their letter dated 7th September, 1993. They had pointed out that MODVAT Credit amounting to Rs. 31,28,267 in respect of input lying un-used and in packed stocks represent credits taken by them prior to 27th February, 1....
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.... said final products (hereinafter, referred to as the "inputs") and for utilising the credit so allowed towards payment of duty of excise leviable on the final products, whether under the Act or under any other Act, as may be specified in the said notification, subject to the provisions of this Section and the conditions and restrictions that may be specified in the notification:- Provided that the Central Government may specify the goods or classes of goods in respect of which the credit of specified duty may be restricted. Explanation:- For the purposes of this rule, "inputs" includes:- (a) inputs which are manufactured and used within the factory of production, in or in relation to, the manufacture of final products, and (b) paints and packaging materials, but does not include:- (i) machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance in or in relation to the manufacture of the final products; (ii) packing materials in respect of which any exemption to the extent of the duty of excise payable on the value of the packagin....
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....he provisions of this clause shall have effect as if for the words "six months" the words "five years" were substituted. (ii) The proper officer, after considering the representation, if any, made by the manufacturer or the Assessee on whom notice is served under Clause (i), shall determine the amount of such credit to be disallowed (not being in excess of the amount specified in the Show Cause Notice) and thereupon such manufacturer or Assessee shall pay the amount equivalent to the credit disallowed, if the credit has been utilised, or shall not utilise the credit thus disallowed. Explanation:- Where the service of the notice is stayed by an order of the Court, the period of such stay shall be excluded from computing the aforesaid period of six months or five years, as the case may be. (2) If any inputs in respect of which credit has been taken are not fully accounted for as having been disposed of in the manner specified in this Section, the manufacturer shall upon a written demand being made by the Assistant Collector of Central Excise pay the duty leviable on such inputs within 10 days of the notice of demand. 5. Shri Bharat Ji Agrawal appearing....
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....acture of final product. There is no dispute that these inputs and final product are eligible for MODVAT credit under Rule 57A. It was submitted that receipt of duty paid inputs alongwith documents showing payment of appropriate Excise Duty; filing of a declaration under Rule 57G (i), indicating the description of the final notified products and the inputs intended to be used in each of such final products; use of duty paid inputs in manufacture of excisable finished products covered under any of the Chapters notified vide Notification No. 177/86; opening and maintenance of statutory account in RG 23 A Parts I and II, and payment of duty on final product so manufactured from the duty paid notified inputs a|e necessary. The allowing of the credit and the utilisation are two different stages having no co-relation to each other. 8. Shri Bharat Ji Agrawal submits that the Applicant company manufactures packet tea at its factory at Etah in the State of UP. The company took MODVAT credit lawfully under Rule 57-A of the Central Excise Rules, 1944, on the inputs received and declared under Rule 57G for use in the manufacture of tea, up to 27th February, 1993. The end product "Packe....
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....uct becomes exempted subsequently. Shri Bharat Ji Agrawal further submits that the demand is barred by limitation under Rule 57-I. When the department seeks to recover or disallow credit wrongly availed by a manufacturer, the department has to issue Show Cause Notice within six months from the date of taking of the credit. In the present case, the Show Cause Notice was issued beyond the period of six months. It was issued on 5th August, 1993 in respect of the credit lying un-utilised as on 28th February, 1993, whereas the credit was availed by the company much earlier. 10. The Custom, Excise and Gold (Control) Appellate Tribunal in its order dated 6th July, 1999 relied upon judgments in Super Cassettes Industries Ltd. v. Union of India 1997 (94) ELT 302 (All) in which it was observed in Paragraphs 7, 10 and 11 as follows:- Paragraph 7. Rule 57C then provides that no credit of the specified duty paid on the inputs used in the manufacture of final product shall be allowed "if the final product is exempt from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty". Rule 57D provides that credit of specified duty allowed in respect of any ....
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....cash deposit in the treasury as required under Rule 9. When the first deposit is made in the treasury there is no payment of any Excise Duty. The deposit and the corresponding credit in the PLA account is only a provision for making payments of Excise Duty on the goods that are manufactured and are to be removed. Therefore, when a person makes the cash deposit in the treasury he does not actually pay Excise Duty, he only makes a provision for the payment thereof and the actual Excise Duty stands paid only when it becomes payable in accordance with the Act and the Rules. Rule 57A clearly shows that MODVAT credit is available for utilising the credit so allowed towards payment of Excise Duty leviable on the final products. Therefore, there can be no finalised credit unless the inputs are used in accordance with Rules 57A and 57F and either Excise Duty on the final product is paid or the inputs are otherwise disposed of for home consumption or export etc. Till such events occur the MODVAT credit is only provisional and cannot be said to be final and irrevocable. It is only for certain accounting purpose that the amount is credited to the PLA account and can be used as a credit balance....
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....tue of judgment of Apex Court in the case of Commissioner of Central Excise, Pune v. Dai-Ichi Karkaria Ltd. (112) ELT 353 in which the Supreme Court had held that a manufacturer obtains credit for the Excise Duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgment thereof; there is no provision in the Rules which provides for reversal of credit by the excise authorities except where it has been (illegally or irregularly taken, in which event, it stands cancelled, or if utilised has to be paid for. The Supreme Court held that such credit is indefeasible. 12. The Tribunal observed that the Apex Court did not consider with the issue as to what happens to credit utilised at a prior point of time when final products became exempt at a later point of time. In the context of holding that a manufacturer obtains credit for duty paid on inputs to by him in the production of an excisable product (and not an exempt product) that the Supreme Court held that credit validly taken is indefeasible. This was not to be understood to mean that credit would still be admissible even if the e....
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....ons that may be specified in the notification. Rule 57-C is clear on the point and provides that the credit of duty is not allowed if final products are exempt. The adjustment in duty credit under Rule 57E applies, if the duty paid on any inputs is varied subsequently due to any reason resulting in payment of refund to, or recovery of more duty from, the manufacturer or importer, as the case may be, of such inputs in the accounts maintained under Rule 9 or Sub-rule (1) of Rule 173G, or if such adjustment is not possible for any reason, by cash recovery from or, as the case may be, refund to the manufacturer availing of the credit under Rule 57A. In the present case, the company was not entitled to MODVAT credit on the inputs lying unused after the final product became exempt and was also not entitled to any adjustment. He has relied upon the procedures to be observed by the manufacturer, in support of his argument. He also submits that in the present case since the MODVAT credit is not permitted on the final product, the limitation for reversal provided under Rule 57-I is not applicable. The limitation of six months in Rule 57-I and of five years in the proviso to the rule is appli....
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....e, was made with reference to excisable final product. The Supreme Court was not considering the question of reversal of the MODVAT credit on raw material after the final products becomes wholly exempted from Excise Duty. 16. We have noticed that Rule 57-A underwent amendment and was substituted by M.F. (D.R.) Notification No. 6/97-C.E. (N.T.) dated 1st March, 1993, inserting Sub-rule (4) which provides that the credit of specified duty under this Section shall be allowed on inputs used in relation to manufacture of the final products whether directly or indirectly and whether contained in the final product or not. Rule 57 (3) (c) was also amended by notification dated 2nd March, 1998 providing that no credit of the specified duty shall be allowed on such quantity of inputs which are used in the manufacture of final product (which are exempted from the whole of the duty of excise leviable thereon or chargeable to nil rate of duty). A new Rule 57-CC was inserted for adjustment of credit or inputs used in exempted final products or maintenance of separate in the entry and accounts of the inputs by the manufacturer. After these amendments the credit on inputs may be adjusted w....