Recovery of Modvat credit wrongly availed whether show cause notice is to be issued - Who are the officers competent to adjudicate Modvat cases - 57-I(i) vis-a-vis 11A - Clarification regarding - Central Excise - 267/104/87-CX.8

Recovery of Modvat credit wrongly availed whether show cause notice is to be issued - Who are the officers competent to adjudicate Modvat cases - 57-I(i) vis-a-vis 11A - Clarification regarding F. No. 267/104/87-CX.8 Dated 15-12-1987 Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs, New Delhi Subject : Recovery of Modvat credit wrongly availed whether show cause notice is to be issued - Who are the officers competent to adjudicate Modvat cases - 57-I(i) vis-a-vis 11A - Clarification regarding. The undersigned is directed to invite attention to point No. 5 of the minutes of the meeting of North Zone Collectors Conference held at Delhi on 13th 14th October, 1987 wherein the following issues were raised. (i) Whether issuing of show cause notice is mandatory under Rule 57-I (i) before disallowing Modvat credit wrongly availed. (ii) Who is the competent officer to decide show cause notice issued for disallowing Modvat credit. (iii) Whether the value of inputs or finished goods would be taken into account for the purposes of imposing penalty under sub-rule (i) of Rule 173Q. The issues raised have been examined by the Board. As regards point (1) Collector of Central Excise, Indore (sponsoring Collector) has brought to the notice of the Board in recent judgment of Indore High Court wherein it was held that it is mandatory to issue a show cause notice under Rule 57-I(i) before reversing a Modvat credit wrongly availed. He was therefore of the view that Board's instructions issued vide F. No. 267/73/87-CX.8, dated 8-9-1987 need revision. In the Board's aforesaid instructions it was directed that in case of wrong utilisation of Modvat Credit under Rule 57-I(i) a letter giving reasons for disallowing credit should be issued to the party and in case of failure in paying the amount within a week, a show cause notice should be issued to him. It is observed that these instructions are not contrary to the judgment of Indore High Court inasmuch as this letter only gives a time limit of 7 days to pay up the Modvat credit wrongly availed, voluntarily. It has therefore been decided that these instructions need not be revised. As regards issue raised at (ii) above, it has been decided that all show cause notices issued for disallowing Modvat credit would be decided by the Assistant Collector. However, in cases where Modvat credit is wrongly availed with an intent to evade excise duty, the show cause notices will have to be issued invoking penel provisions and decided by Collector. As regards issues at (iii) above, it may be mentioned that such inputs as per Rule 57F (ii) are to be treated as if the same are manufactured by receiving factory. Therefore the value of the inputs in respect of which wrong credit is availed have to be taken into consideration for determining the penalty under Rule 173Q of Central Excise Rule. These instructions may be brought to the notice of field formations. Receipt of this letter may please be acknowledged.