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2010 (12) TMI 277 - AT - Central Excise


Issues Involved:
1. Disallowance of Modvat credit.
2. Compliance with Rules 57G and 57H of the Central Excise Rules, 1944.
3. Validity of the Department's rejection of the Modvat credit claim.
4. Requirement of documentary proof for availing Modvat credit.
5. Utilization of Modvat credit post-rejection under Rule 57H.

Issue-wise Detailed Analysis:

1. Disallowance of Modvat Credit:
The appellants' Modvat credit claim of Rs. 60,90,338.37 was partially disallowed by the Assistant Commissioner, Chittorgarh, allowing only Rs. 1,19,123 and rejecting Rs. 59,71,215.37. The rejection was based on non-fulfillment of conditions under Rule 57H. The Commissioner confirmed the demand of duty amounting to Rs. 58,71,215, along with interest and penalties.

2. Compliance with Rules 57G and 57H of the Central Excise Rules, 1944:
The appellants argued that they had filed the necessary declaration under Rule 57G on 8th May 1991 and 4th June 1991. Rule 57H required permission for utilizing inputs lying in stock before 25.07.1991. The appellants mistakenly believed Rule 57H applied to inputs received after the declaration, leading to a rejected application under Rule 57H in October 1992. The Deputy Commissioner rejected the claim under Rule 57H on 17.05.2000, noting that inputs must be received before the declaration under Rule 57G.

3. Validity of the Department's Rejection of the Modvat Credit Claim:
The appellants contended that the rejection under Rule 57H did not preclude them from availing credit under Rule 57G. They utilized the credit in January 2003, leading to a show cause notice on 28.01.2004. The department did not dispute the receipt of inputs after 25.07.1991, and the rejection under Rule 57H was based on the misapplication of the rule. The Commissioner's order was challenged as erroneous.

4. Requirement of Documentary Proof for Availing Modvat Credit:
The Commissioner found that the appellants failed to provide documentary proof for availing credit. However, the Assistant Commissioner's letter dated 18.11.1998 referenced documents like RG-23A Pt. I and Pt. II and invoices, which were sufficient proof. The appellants argued that the Commissioner's finding was contrary to the records and perverse.

5. Utilization of Modvat Credit Post-Rejection Under Rule 57H:
The appellants maintained that the rejection under Rule 57H did not affect their right to utilize credit under Rule 57G. The Deputy Commissioner's order and the Assistant Commissioner's letter did not allege that inputs were received before the declaration. The Commissioner's reliance on pleadings from earlier proceedings was flawed, as such pleadings cannot be used without following proper procedures.

Conclusion:
The Tribunal concluded that the goods were received after the submission of the declaration under Rule 57G, making Rule 57H inapplicable. The appellants were lawfully entitled to avail and utilize the credit in January 2003. The entire proceedings were deemed bad in law, and the appeals were allowed, setting aside the impugned order with consequential relief.

 

 

 

 

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