2006 (4) TMI 129 - SC - Central Excise

Whether duty paid on the furnace oil used as input could be availed of as credit under the Modvat scheme as envisaged under Rule 57B of the Central Excise Rules 1944? - Held that - The relevant period in these appeals is March 97 to Feb 99. Therefore in terms of Rule 57B as amended the appellant would be entitled to take credit in respect of the furnance oil for the amount actually paid on account of specified duty upto 2nd June 1998 and thereafter at 95% of the duty paid. The appeals are accordingly allowed with no order as to costs. Whether the credit on the inputs used under Rule 57A Central Excise Rules 1944 was restricted to 10% ad valorem - Held that - The Notification dated 1st March 1994 as amended on 3rd May 1997 clearly provided that as far as Rule 57A is concerned the manufacturer was entitled to input credit only up to the limit of 10% ad valorem. In that view of the matter this appeal must be dismissed. However learned counsel appearing on behalf of the appellant has sought to urge that notification dated 3-5-97 was ultra vires. This is not the subject matter of the present appeal. It is open to the appellant to approach an appropriate forum to raise this issue if it is otherwise so entitled in accordance with law.

Summary

Issues:
1. Interpretation of Rule 57A and Rule 57B of the Central Excise Rules, 1944 regarding availing credit under the Modvat scheme for duty paid on furnace oil used as input.
2. Whether the 10% ad valorem limit on credit applies to goods cleared under Rule 57B.
3. Impact of Notifications on the availability of credit under Rule 57B.

Analysis:
1. The judgment addresses the question of whether duty paid on furnace oil used as input can be availed as credit under the Modvat scheme as per Rule 57A and Rule 57B. Rule 57A empowers the Central Government to specify excisable goods, duties, conditions, and restrictions for availing credit. Rule 57B, on the other hand, allows manufacturers to take credit of specified duty paid on goods like fuel used in manufacturing final products. The Court clarifies that Rule 57B provides special treatment for certain goods distinct from Rule 57A.

2. The Court examines a Notification issued by the Central Government specifying duties for which credit could be taken, including a proviso restricting credit on certain inputs to 10% ad valorem. The appellant argued that this limit did not apply to goods cleared under Rule 57B. The Court disagrees with the Tribunal's decision, emphasizing that Rule 57B's non-obstante clause indicates a different treatment for specified goods. The Court holds that the 10% limit does not apply to goods under Rule 57B, as separate rules would be redundant otherwise.

3. The judgment discusses another Notification limiting credit under Rule 57B but notes that such limitations are explicitly stated in separate notifications. For instance, a specific Notification allowed full credit on inputs received before a certain date. The Court highlights that restrictions on credit under Rule 57B are distinct from those under Rule 57A. Additionally, the Court dismisses an appeal challenging the 10% limit under Rule 57A, stating that the manufacturer was entitled to credit only up to that limit as per the relevant Notification.

This detailed analysis of the judgment provides a comprehensive understanding of the interpretation of Rule 57A and Rule 57B, the application of credit limits, and the impact of Notifications on availing credit under the Modvat scheme.