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M/s Bharat Heavy Electricals Limited Versus CEC, Bhopal (MP)

2015 (4) TMI 1101 - MADHYA PRADESH HIGH COURT

Disallowance of MODVAT credit - Availing the facility of MODVAT credit of duty paid on inputs, in terms of the provisions of 57A of the Central Excise Rules - Assessee had taken MODVAT credit on the strength of duty paying documents which was found to have been issued more than six months prior to the date on which credit was taken. In the entries made in the documents maintained under RG-23 A - Part I & II, even though in Part I the entry is made showing date of taking availment of MODVAT credi .....

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erred under Rule 57A and Rule 57G only provides the procedure to be observed by the manufacturer. Therefore, when power is exercised under Rule 57G, the Central Government is not empowered to curtail any right conferred by the substantive provision of Rule 57A and, therefore, the Notification issued under Rule 57G prescribing the time limit for taking the credit as found by the High Court of Gujarat is found to be ultra vires, as it is beyond the power and is in conflict to the impugn provision .....

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some error in making the entry, denial of the benefit cannot be permitted. The act of the assessee in making such receipt of input in Part I of a single comprehensive RG-23 A action is evidence enough with regard to crystallization of right to MODVAT credit and merely because in second accounting entry of Part II, there is some inconsistency, the right accrued already to receive the credit cannot be taken away. Also the credit which had accrued to the assessee could not be denied in law by the .....

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right (to the credit under the MODVAT Scheme as it stood on 29.06.1995) accrued to an assessee on the date when they paid the tax on the raw materials or inputs‟, as held by Hon‟ble Supreme Court in para 6 of Eicher Motors Limited Vs. UOI - 1999 (106) ELT 3 (SC) and that such right gets crystallized in his favour instantaneously once the input is received in the factory on the basis of the existing scheme‟? (ii) Whether act of making such receipt of the inputs in Part-I of the .....

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can be denied in law by CEGAT simultaneously holding it to be inadmissible. 2- By an order passed, the Tribunal on 17.10.2000, in Appeal No.E/1136/96-NB, contention of the assessee - M/s Bharat Heavy Electricals Limited, challenging disallowance of MODVAT credit to the tune of ₹ 35,07,645/- and recovery of the same under Rule 57-I of the Central Excise Rules and imposition of penalty was rejected. 3- The assessee is engaged in manufacturing of various excisable goods. They are availing th .....

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anufacturer is required to file a declaration under Rule 57G(1) after obtaining the dated acknowledgement, take credit of the duty paid on inputs received and in accordance to the second proviso to sub-rule, the manufacturer is restrained from taking credit after six months of the date of issuance of any documents specified. It was found that in the entries made in the documents maintained under RG-23 A - Part I & II, even though in Part I the entry is made showing date of taking availment o .....

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art I and Part II is a consolidated record. There are columns of credit and debit of duty only in Part II of RG-23A and not in Part I of RG-23A. Thus, we note that the entry in RG-23A Part II is the entry which is to be taken as the entry for computing the period of six months. The contention of the appellant that a right accrues, there is no denial of this contention. The right no doubt accrues but here the limited question is from which date the period of six months is to be counted. Since dat .....

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is, therefore, dismissed. the appeal was dismissed. Now, in this reference, we are required to consider the questions as referred to. 5- Having heard learned counsel for the parties, we find that section 57A of the Central Excise Rules, 1945 provides for admissibility of credit on duty paid on specific inputs used in manufacturing of a specified final product. The second proviso to sub-rule 57G(1) inserted with effect from 29.6.1995 contemplates as under: ….The manufacturer shall not tak .....

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nce to accounting and making entries in the RG-23 A - Part II that the dispute has risen. Even though in the entries made under Part I with regard to account of inputs, the entry is made showing a date within six months, but in Part II - the entry number showing the date is beyond six months and it is only because of this entry made in Part II that MODVAT credit has been denied to the assessee. 7- Admittedly, the Tribunal in its order on 17.10.2000 and in the portion reproduced hereinabove, has .....

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nted to an assessee is a right accrued to the assessee on the date when they paid the tax on the raw material or the inputs and this right would continue until the facility available thereto gets worked out or until those goods existed. In paragraph 6, the Hon‟ble Supreme Court has dealt with the matter in the following manner: 6. … Thus a right accrued to the assessee on the date when they paid the tax on the raw materials or the inputs and that right would continue until the facil .....

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upreme Court in the case of Collector of Central Excise, Pune Vs. Dai Ichi Karkaria Limited, 1992 (112) ELT 353 (SC), and after relying upon the judgment in the case of Eicher Motors Limited (supra), in paragraphs 17 and 18, the principle has been so crystallized: 17. It is clear from these Rules, as we read them, 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 a .....

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acturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. The credit is, therefore, indefeasible. It should also be noted that there is no co-relation of the raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a fi .....

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he benefit of MODVAT credit was denied to the assessee only because of an entry made in RG-23 A Part I & Part II, showing a date beyond six months. In the said case, the principle of law governing grant of MODVAT credit; the requirement of Rules 57A and 57G; the law laid down in the case of Eicher Motors Limited (supra) and Dai Ichi Karkaria Limited (supra) have all been considered and it has been held by the Gujarat High Court in the aforesaid case has held that merely because the entry of .....

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onferred under Rule 57A and Rule 57G only provides the procedure to be observed by the manufacturer. Therefore, when power is exercised under Rule 57G, the Central Government is not empowered to curtail any right conferred by the substantive provision of Rule 57A and, therefore, the Notification issued under Rule 57G prescribing the time limit for taking the credit as found by the High Court of Gujarat is found to be ultra vires, as it is beyond the power and is in conflict to the impugn provisi .....

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