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2016 (6) TMI 354 - GUJARAT HIGH COURT

2016 (6) TMI 354 - GUJARAT HIGH COURT - 2016 (340) E.L.T. 55 (Guj.) - Whether the bar imposed under Rule 57G(5) of the Central Excise Rules, 1944 for availment of credit within a period of six months would be applicable in relation to deemed credit availed under Rule 57G(5) and Notification No.29/96 issued thereunder - Held that:- Rule 57G(5) of the rules provides for a period of limitation of six months from the date of issue of any document specified in sub-rule (3) thereof for the purpose of .....

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he purpose of applicability of sub-rule (5) of rule 57G, the limitation would commence from the date of issuance of the documents specified in sub-rule (3) thereof, whereas, insofar as the availment of deemed credit under Notification No.29/96 is concerned, provision is made for availing the same without any document evidencing payment of duty on the inputs. Under the circumstances, in the absence of any documents specified in sub-rule (3) of rule 57G of the rules being available for the purpose .....

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s specified under rule 57 are received by the manufacturer, after nine months. But neither sub-rule (5) of rule 57A of the rules under which Notification No.29/96 has been issued provides for any limitation for availment of the benefit under the notification, nor does Notification No.29/96 provide for any such limitation. However, merely because rule 57A(5) or Notification 29/96 do not provide for a limitation for availing of the benefit of deemed credit, the limitation under rule 57G(5) of the .....

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he Commissioner of Central Excise, Ahmedabad is directed against the order dated 12.01.2005 passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench, Mumbai (hereinafter referred to as the Tribunal ). 2. While admitting the appeal, this court by an order dated 23.08.2006, had formulated the following substantial question of law: Whether the bar imposed under Rule 57(G) for taking credit availment with period of 6 months is mandatory or not? 3. Having heard the learned c .....

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le Mills Pvt. Ltd. is engaged in the manufacture of Cotton Fabrics/Man Made Fabrics falling under Chapter 52, 54 and 55 of the Central Excise Tariff, 1985. The assessee, being an independent processor, was availing and utilizing deemed credit at the rate specified as per Condition No.3 of Notification No.29/96-CE (NT) dated 03.09.1996 prior to introduction of the compounded levy scheme in respect of independent processors under section 3A of the Central Excise Act, 1944 (hereinafter referred to .....

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see to avail the deemed credit and accordingly, a show cause notice dated 18.06.1999 came to be issued to the assessee calling upon it to show cause as to why wrongly availed deemed credit to the tune of ₹ 46,97,771/- should not be recovered under rule 57(1) of the Central Excise Rules, 1944 (hereinafter referred to as the rules ) read with section 11A of the Act, and as to why penalty should not be imposed under section 173Q for violation of rule 57A of the rules. 5. By an Order-in-Origin .....

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thereof before the lower authority. He, however, set aside the penalty observing that the assessee had not utilized the same for discharge of its duty liability and the credit was taken only on 12.12.1998 in the deemed credit register. The assessee carried the matter in further appeal before the Tribunal and succeeded. 6. Ms. Manisha Lavkumar, learned Central Government Counsel for the appellant, assailed the impugned order by submitting that the Central Government, in exercise of powers conferr .....

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en the final products would get cleared from the manufacturer s factory. The emphasis being that the credit could be availed at the time of clearance of the final products . It was pointed out that though Notification No.29/96 has no prescribed time limit for availing the credit, rule 57G(5) of the rules already prescribed a time limit of six months for availing the credit. Referring to the contents of the said rule, it was submitted that the same makes it explicitly clear that the time limit wi .....

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frame for letting the manufacturer take credit. It was urged that the notification is required to be read in consonance with the rules since it gets its force and power by the rules and hence, the language of the rules is what ought to be looked at and construed strictly. It was submitted that there is no ambiguity whatsoever in terms of the language in rule 57G(5) of the rules. 6.1 Next, it was contended that even if it is considered that since this is a case of deemed credit and credit is adm .....

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teen months is clearly beyond even a reasonable period of time. 6.2 It was pointed out that by a Notification No.44/98 dated 10.12.1998 issued by the Central Government under sub-rule (2) of rule 57A of the rules, the earlier Notification No.29/96 came to be modified by introducing paragraphs 7B and 7C. As an outcome of the said notification, the benefit of deemed credit would cease to be available to those manufacturers (independent processors) under the earlier notification, that is, notificat .....

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roviso to rule 57G(5) of the rules. 6.3 In support of her submissions the learned counsel placed reliance upon the decision of the Supreme Court in the case of Osram Surya (P) Ltd. v. Commissioner of Central Excise, Indore, (2002) 9 SCC 20, for the proposition that by introducing a limitation in rule 57G, the statute has not taken away any of the vested rights accrued to the manufacturers under the scheme of MODVAT. That vested right continues to be in existence and what is restricted is the tim .....

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s. It was submitted that sub-rule (1) thereof provides a scheme where duty actually paid on inputs would be allowed as Cenvat credit. It was submitted that rule 57G is relatable to rule 57A(1) of the rules and provides for the manner of taking credit of duty paid on inputs under rule 57A. It was submitted that in the present case, the notification in question provides for deemed credit as contemplated under sub-rule (5) of rule 57A of the rules, which is a separate provision. Referring to the no .....

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s submitted that the same provide for cases where deemed credit would not be available. It was argued that it is not the case of the revenue that during the period July 1997 to April 1998, the goods have not been exported. It was submitted that the fact that the final products have been exported after following due procedure, is not in dispute. The fact regarding duty actually leviable or payable on the final product is also not in dispute. Further, there is no dispute as regards the amount. All .....

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3) thereof. Referring to the scheme of the rules, it was pointed out that under rule 57A(1) and 57G, credit is taken when the inputs are received, whereas under the notification issued under rule 57A(5), deemed credit can be availed at the time of clearance of the products. It was submitted that in the present case, the benefit is not sought to be denied on the ground that it was not otherwise available to the assessee, but only on the ground that it could not have been availed after seventeen m .....

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al is the final fact finding authority and in the absence of any perversity in the findings recorded by the Tribunal, there would be no warrant for interference. 7.2 Insofar as reliance placed by the learned counsel for the appellant on Notification No.44/98-CE (NT) dated 10.12.1998 is concerned, it was pointed out that paragraphs 7B and 7C thereof do not have any relevance insofar as the facts of the present case are concerned. It was further submitted that the said notification does not provid .....

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or claiming Cenvat credit even on actual basis. It was submitted that sub-rule (5) of rule 57A of the rules opens with a non-obstante clause and lays down that the scheme applies to those goods where the declared inputs are not used directly by the manufacturer of final product. The scheme, under sub-rule (5) of rule 57A of the rules, applies to those cases where inputs are not used by the processor directly. The inputs are not received in the factory, and therefore, the question of inputs being .....

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der section AA of Chapter V of the rules. It was submitted that there is a conscious departure insofar as rule 57A(5) is concerned, and it is not subject to section AA of the rules. Referring to Notification No.29/96, it was submitted that the same makes provision for all eventualities and is a complete code in itself and that the other provisions of section AA of the rules would not apply and consequently, the provisions of rule 57G(5) would not be applicable in the facts of the present case. 7 .....

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, on which reliance has been placed by the Tribunal, while holding in favour of the assessee. Reliance was also placed upon the decision of this court in the case of Commissioner of Central Excise and Customs, Surat-I v. Swagat Synthetics, 2008 (232) ELT 413 (Guj.). It was, accordingly, urged that the appeal being devoid of merits, deserves to be dismissed and that the question is required to be answered in favour of the assessee. 8. From the question as formulated by this court at the time of a .....

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excisable goods (hereafter, in this section, referred to as the final products) as the Central Government may, by notification in the Official Gazette, specify in this behalf for the purpose of allowing credit of any duty of excise or the additional duty under section 3 of the Customs Tariff Act, 1975 (51 of 1975), as may be specified in the said notification (hereafter, in this section, referred to as the specified duty) paid on the goods used in the manufacture of the said final products (here .....

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under subrule (5) of rule 57A of the rules, and hence, it would be necessary to advert to the same. Sub-rule (5) of rule 57A of the rules reads thus: (5) Notwithstanding anything contained in sub-rule (1), the Central Government may, by notification in the Official Gazette declare the inputs on which declared duties of excise or additional duty (hereinafter referred to as declared duty) paid shall be deemed to have been paid at such rate or equivalent to such amount as may be specified in the s .....

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ral Government may by notification in the Official Gazette declare inputs on which declared duties of excise or additional duty paid shall be deemed to have been paid at such rate or equivalent to such amount as may be specified. The credit may be allowed of such declared duty deemed to have been paid in such manner and subject to such conditions as may be specified, even if the declared inputs are not used directly by the manufacturer of final products declared in the said notification, but are .....

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finished goods notified in exercise of powers conferred under that rule. 13. Thus, on a plain reading of sub-rule (5) of rule 57A of the rules, it is evident that credit is required to be allowed in such manner and subject to such conditions as may be specified. These conditions are not specified in the rules and hence, one has to look at the notification to find out the conditions subject to which deemed credit can be allowed. A perusal of Notification No.29/96 shows that paragraph 1 of the sa .....

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e said final products. On a reading of the notification as a whole, there is nothing therein to suggest any limitation as regards availment of deemed credit. 14. As noticed earlier, the provisions of section AA apply to the finished excisable goods notified by the Central Government under rule 57A(1) of the rules. Insofar as the inputs on which declared duties are deemed to have been paid as notified under sub-rule (5) of rule 57 are concerned, the provisions of section AA have not been made app .....

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thereof provides for the procedure to be observed by the manufacturer. Sub-rule (2) provides that a manufacturer who has filed a declaration under sub-rule (1) may, after obtaining the acknowledgment, take credit of the duty on the inputs received by him. Sub-rule (3) provides that no credit under sub-rule (2) shall be taken by the manufacturer unless the inputs are received in the factory under the cover of any of the documents enumerated thereunder. Sub-rule (4) provides that no credit shall .....

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ule employs the word also , viz., credit shall also not be taken by the manufacturer after six months of the date of issue of any document specified in sub-rule (3) . Therefore, sub-rule (5) is in addition to what is provided under sub-rule (4) thereof, namely, no credit shall be taken by the manufacturer in respect of invoices referred to in clause (g) of sub-rule (3) after 30th September, 1996 . Moreover, on a plain reading of sub-rule (5) of rule 57G of the rules, it is apparent that the same .....

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No.29/96, it may be noted that the same specifically provides that credit of the declared duty deemed to have been paid shall be allowed to the manufacturer of final products, without production of documents evidencing payment of duty on the said inputs at the time of clearance of final products. Thus, under the scheme of the notification, deemed credit can be availed of without production of documents evidencing payment of duty on the inputs. Thus, for the purpose of applicability of sub-rule .....

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tation would not commence to run insofar as the deemed credit is concerned. Consequently, it would not be possible to apply sub-rule (5) of rule 57G of the rules to the facts of the present case. 17. Insofar as the reliance placed upon the subsequent notification dated 10.12.1998 for the purpose of imputing mala fide motives to the assessee of availment of deemed Cenvat credit only in view of the new notification having been issued is concerned, in the opinion of this court while examining the a .....

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scussed hereinabove, sub-rule (5) of rule 57G of the rules postulates that credit shall also not be taken by the manufacturer after six months of the date of issue of any document specified in sub-rule (3) thereof and where intermediate products manufactured by the user of inputs specified under rule 57 are received by the manufacturer, after nine months. But neither sub-rule (5) of rule 57A of the rules under which Notification No.29/96 has been issued provides for any limitation for availment .....

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