TMI Blog1998 (3) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... throughout the country. It reads as under :- "TELEX To All Chief Commissioners of Central Excise All Commissioners of Central Excise From B.P. Verma, Member (Central Excise). CBEC, New Delhi. F. No. 296/46/97-CX. I (Pt.) (.) You may recall that vide telex of even number dated 11-11-1997 special check was ordered for Modvat by all field formations (.) Reports received in this regard has disclosed misuse of Modvat to the extent of Rs. 133 crores, out of which Rs. 27 crores have been reversed/realised(.) In order to complete these checks in a more systematic and authentic manner, it is ordered as follows :- (1) Balance of the Modvat misused beyond what has been reversed/recovered should also be recovered immediately. (2) Al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the object of avoiding multi-point and cascading effect of taxation. The scheme allows the manufacturers of various products to take credit of the excise duty paid on the inputs used by them or in relation to the manufacture of the final products while paying the excise duty on the final products manufactured by them. The manufacturers can pay the duty from the credit earned by them on the inputs. If any balance duty is payable then the same is paid in cash. For availing the facility of Modvat scheme the manufacturers have to follow the prescribed procedure and maintain the requisite records. The scheme has to be found contained in Rules 57A to 57J of the Central Excise Rules, 1944. 2.1 With effect from April 1994, the Central Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the said letter could not be utilised by the Commissioners for initiating indiscriminate wholesale action against each and every industry. It was further stated that the cost audit initiated under Section 14 shall be ordered only when required to be initiated and shall be subject to a time frame being specified so as to minimise the inconvenience caused to any manufacturer. 4.1 This submission of the learned Counsel for the respondent was recorded in the order of the Court dated 5-3-1998. It took care of the major part of the grievance raised in the petition. Further hearing was adjourned to 17-3-1998, on which date a counter filed on behalf of the respondents had come on record. The hearing was adjourned confined to the controversy ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed circular is concerned, it is ultra vires the jurisdiction of CBEC and has to be struck down for the reasons to be stated hereinafter. 7. As already noticed Modvat scheme is statutory. It has a laudable public purpose behind. Sub-rule (2) of Rule 57A specifically provides for credit of specified duty allowed under sub-rule (1) being utilised towards payment of duty on excise leviable on the final products, whether under the Central Excise Act or under any other Act as may be specified in an appropriate notification so long as the manufacturers or the person concerned complies with the provisions of the Section and conditions and restrictions if any specified in the said notification. Sub-rule (2) of Rule 57G also provides for the manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e advantage of the Modvat facility. In Torrent Laboratories Ltd. v. U.O.I. - 1991 (55) E.L.T. 25 a Division Bench of Gujarat High Court has observed that the basis of Modvat is the mutual trust and confidence. While enacting Modvat provisions the legislature has reposed a sort of trust or confidence on the assessee, the legislature expects the same type of candid and forthright behaviour on the part of the assessee. In SRF Ltd. v. CBEC - 1993 (66) E.L.T. 145, the High Court of Madras has held that the Modvat scheme introduced by statutory rules cannot be either nullified or short circuited by means of clarification. 9. For the foregoing reasons the following part of the impugned circular date 14-1-1998 is held to be illegal and ultra vire ..... X X X X Extracts X X X X X X X X Extracts X X X X
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