TaxTMI 
TaxTMI 
2000 (10) TMI 167
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....lants had reversed the credits thitherto taken on certain inputs and had ceased to take credits on such inputs for future periods as directed by Departmental authorities. This state of affairs continued on account of the fact that the orders of the Assistant Collector and the Collector (Appeals) were, by and large, adverse to the party. It was the Tribunal's favourable order that changed the scenario. 2.On the strength of the Tribunal's order dated 18-7-96, the appellants took Modvat credits, for the period March, 1987 to September, 1996, on inputs held to be eligible for Modvat credit as per the said order. The credits so taken included the following :- (a) Rs. 4,96,744/- taken on 23-9-96 (b) Rs. 88,89,512/- taken on 21-10-96 (c) Rs. 10,57,409/- taken on 23-9-96 (d) Rs. 58,50,833/- taken during the period September, 1996 to January, 1997 (e) Rs. 1,23,31,456/- taken during September, 1996 to January, 1997 The Department, by show cause notice dated 14-3-97, proposed to disallow th....
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....uts from 1-3-87 till date. The Superintendent also restrained the appellants from taking credit on such inputs in future. Aggrieved by the Superintendent's action, the party took up the matter before the Assistant Collector. The Assistant Collector, as per order dated 9-12-1987, held some of the inputs to be eligible for Modvat credit limited to particular uses and held the rest of the inputs to be ineligible for credit. This order of the Assistant Collector, as we understand, was an order which decided the eligibility or otherwise of the inputs declared by the party for Modvat credit under Rule 57A. Pursuant to the directions of the Superintendent and the subsequent order of the Assistant Collector, the party on 22-12-1987 debited the credit of Rs. 10,57,409.88 taken earlier for the period March, 1987 to October, 1987. They also debited on 14-3-88 the credit of Rs. 4,96,744.87 taken earlier for the same period. This fact was intimated to the Superintendent by the party by letters dated 2-4-1988 and 7-10-1988. For the periods subsequent to the order of the Assistant Collector, the appellants took Modvat credit on inputs only in terms of the said order. Nevertheless, they preferred ....
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....water by increasing pH thereof so as to prevent scale formation and also prevent corrosion so as to make the water fit for generation of steam to be used for cooking of bamboo/hardwood chips, drying of paper and generation of electricity for running the plant These are used for treatment of water to prevent the deposit of salts and for removing unwanted elements from raw water and thus for maintenance of boiler. 10. Hydrazine Hydrate For purification of water by reacting with oxygen and converting it into water inside the deareator system. The steam generated by using this water is then used for cooking of bamboo/hardwood chips, drying of paper and generation of electricity for running the plant. These are used for treatment of water to prevent the deposit of salts and for removing unwanted elements from raw water and thus for maintenance of boiler. 11. Ion Exchange Resins For treatment of boiler water to make it fit for generating steam to be used for cooking of bamboo/hardwood chips drying of paper and generation of electricity for running the plant. -do- 12. Wetnol This is an organic surface active agent used for ....
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....found to be parts of machinery. All these inputs were held to be eligible for Modvat credit under Rule 57A in the light of the decision of Larger Bench in Union Carbide India Limited v. C.C.E. [1996 (86) E.L.T. 613 (T)]. In respect of the parts of machinery, the Department, later on, filed a Reference Application with the Tribunal and the same was allowed as per order dated 21-1-1997. Going by the submissions of the two sides regarding the reference, it appears to us that the referred question of law is still pending before the Hon'ble Madhya Pradesh High Court and that there is no stay of operation of the Tribunal's order dated 18-7-1996. Neither side has claimed to have preferred any appeal to the Hon'ble Supreme Court against the Tribunal's order, which has attained finality, subject only to the High Court's decision in the Reference. 6.In respect of those inputs for which credit was disallowed in toto by the lower authorities but allowed by the Tribunal as per order dated 18-7-1996, the appellants took full credit by making appropriate entries in their RG-23A Register Parts I and II during the period September, 1996 to January, 1997. In that connection, they stated full deta....
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....a situation in which there was no departmental embargo on taking of Modvat credit but the aesessee just did not take the credit. In the instant case, learned Counsel submits, the Central Excise Superintendent, by his letter dated 30-10-1987, had specifically directed the appellants to debit all credits already taken and also to refrain from taking credits in future. Further, the Assistant Collector's order as upheld by the Collector (Appeals) had virtually upheld the Superintendent's action. It was only after the Tribunal's Order dated 18-7-96 that the appellants were able to take the Modvat credits on the inputs in question. Therefore, in the counsel's view, the limitation of six months prescribed under the aforesaid proviso to Rule 57G(2) cannot be applied to the appellants' case and all the credits which were disallowed by the Commissioner on the ground of limitation should be restored to the assessees. Learned Counsel has also relied on the CBEC Circular No. 275/109/96-CX., dated 26-11-96 which clarified that the restriction of six months under Rule 57G for availment of Modvat credit was applicable only to those cases where the assessee himself took/availed the credit. Relying ....
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.... setting aside the impugned order and allowing the appeal. 8.Learned DR has mainly argued that the Tribunal's order dated 18-7-96 is no blanket sanction to the appellants for availment of the Modvat credits in question. According to him, any Modvat credit on the inputs covered by the Tribunal's decision in the appellants' favour could be allowed to them only on due fulfilment of the procedural requirements under Rule 57G such as filing of proper declaration of inputs, proof of payment of duty on the inputs by valid documents, taking of credit within the period of six months etc. Since the appellants failed to comply with one or the other of these requirements, they were not entitled to the credits in question. The order of the adjudicating authority has, therefore, to be upheld, pleads learned DR. 9.On a careful examination of the submissions before us, we note that the adjudicating authority has denied Modvat credits of Rs. 86,72,247/-, Rs. 58,50,833/- and Rs. 1,23,31,456/- totalling to Rs. 2,68,54,536/-. Out of these credits, the credit of Rs. 86,72,247/- had been taken on the inputs mentioned at Sl. Nos. 1 to 5 in the Tribunal's order dated 18-7-96. We note that these inpu....
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....l4, 15, 16, 18, 19), the question will be decided by the Commissioner as above. 10.We are now on the question of limitation and we recollect the facts and circumstances in which the appellants were not able to avail the credit within the period of six months from the date of issue of duty-paying documents. The limitation of six months for availment of Modvat credit was introduced in Rule 57G with effect from 29-6-1995 by Notification No. 28/95-C.E. (N.T.), whereby the second proviso was added to Rule 57G(2). The proviso reads as under :- "Provided further that the manufacturer shall not take credit after six months of the date of issue of any of the documents specified in the First Proviso to this Sub-Rule." The Larger Bench of the Tribunal in the case of Kusum Ingots and Alloys Limited (supra) held that, after 29-6-95, no assessee could take Modvat credit on the strength of duty-paying documents which were more than six months old. We note that the Larger Bench had no occasion to consider a factual situation like the one obtaining in the instant case. In the case before us, the appellants had originally taken Modvat credit on various inputs in RG-23A Part I/Part II regist....
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....vailable in the appellants' case where it was the Tribunal's order dated 18-7-96 which removed the Departmental embargo on the taking of Modvat credit on inputs. The period of six months must, therefore, be computed from 18-7-96. The denial of credit taken within six months from the said date, on the ground of time-bar is not justifiable, as the same is contradictory to Board's clarification. As per the ruling of the Apex Court in the cases of Usha Martin (supra) and Paper Products (supra), the Board's circulars are binding on the Departmental authorities and any view taken by the authorities contradictory to the clarifications given by the Board will be invalid. Therefore, we hold that the Modvat credits taken in respect of the inputs mentioned at Sl. Nos. l to 11 and 14 to 19 in the list of inputs cannot be denied to the party on the ground of limitation. 11.The Tribunal's order dated 18-7-96 was on the issue whether the inputs were eligible for credit of duty under Rule 57A. The Appellants are entitled to the benefits of the order and the Department is bound to give effect to it. The credit of Rs. 86,72,247/- is accordingly liable to be given. Out of the amount of credit of R....