No Limitation on taking of Cenvat Credit.

PJ/Case Laws/2010-11/1001

Case: CCE & C v/s Gujarat Bottling Co. Ltd

Citation: 2010 (102) RLTONLINE 138 (GUJ.)

Issue:- Whether credit is to be taken within a reasonable time of 6 months from the date of receipt of input or can be taken later on?

Brief Facts:- Here the Respondent being the assessee is engaged in the manufacture of aerated water and Maaza soft drink. The assessee is working under self removal procedure prescribed under Chapter No. VIIA of the Central Excise Rules, 1944. They were availing the benefit of credit of excise duty paid on inputs used in the manufacture of Thums-up and utilizing it to pay central excise duty leviable on Thums-up under Rule 57-A of the Rules.

Intimation was sent by the assessee to the Revenue that they had taken differential higher credit of BED in their RG23A Part II (Maza) on 18.09.1991 on inputs, namely, Crown corks received earlier in the factory. They stated that they have failed to take the aforesaid credit due to their lack of knowledge of the correct applicable provision of the law.

Revenue issued show cause notice to the respondent as they were of the view that the respondent had wrongly taken credit under Rule 57-B as in absence of any specific provision under the Rule 57B, notional credit under Rule 57B at a later date than the receipt of inputs in the factory of the Modvat user cannot be allowed merely on the ground of lack of knowledge of the correct applicable provision of the Rules for the purpose of claiming Modvat credit under Rule 57B.

The Adjudicating Authority disallowed the higher notional Modvat credit taken by the respondent. In appeal, the Collector (Appeals) set aside the impugned orders disallowing the taking of credit.

Revenue filed appeal before the Tribunal. The Tribunal relied upon the judgment given in Commissioner of Central Excise V/s. Mysore Lac & Paint Works [1991 (52) ELT 590] wherein it was held that Modvat credit once taken does not disentitle the assessee to take the additional credit if later it is found that credit was taken short. The Tribunal further observed that such subsequent taking of the additional higher notional credit should be taken within a reasonable time limit of six months. The Tribunal dismissed the said appeals.

Appellants Contention:- Revenue contended that there is no provision in Rule 57B which permits the assessee to claim Modvat credit at a later date. Reliance was placed on Board’s letter dated 07.9.1988.It was submitted that the issue was raised in RAC meeting (Hyderabad) on 12.12.1988 and the Chairman of the CBEC had clarified that the law does not permit to claim credit at a later date, if not taken initially, in absence of any specific provisions under the Modvat Rules. It was submitted that the assessee is not entitled to take credit at a later date. The respondent had made mistakes repeatedly even after benefit granted by Collector (Appeals) on similar issue. It was submitted that the respondent should not be allowed to make mistakes of law repeatedly, when they know about the provisions of law very well.

Reasoning of Judgment:- The High Court observed that the Tribunal had merely followed the judgment given in Collector of Central Excise, Pune V/s. Associated Flexibles and Wires Private Limited [1994 (74) ELT 902 (Tribunal)]wherein the credit was taken by assessee at a later date on account of some clarification which was issued subsequently. Further the Tribunal had relied on Mysore Lac & Paint Works V/s. Commissioner of Central Excise, 1991 (52) ELT 590 wherein it was held that the Credit could be taken within a reasonable time after the receipt of the inputs and extended the same principle by further holding that considering the entire scheme of the Central Excise Act and allied matters, the period of six months was a reasonable period.

The High Court relied upon the judgment in Commissioner of Central Excise, Pune V/s. SPM Tools [1998 (99) ELT 147 (Tribunal)], wherein it was held that there is no bar expressly or impliedly provided for in any of the relevant Rules disentitling the party from availing of credit at a later date. Further, reliance was placed on Government of India V/s. Citedal Fine Pharmaceuticals [1989 (42) ELT 515 (S.C.)]wherein on facts it was held that the High Court committed error in holding that Rule 12 provides for recovery of escaped duty although the Act is silent on question of escaped assessment and, therefore, it is ultra vires of the Act. The Court further held that the Rule 12 is not unreasonable and violative of Article 14 of the Constitution of India merely because it provides no period of limitation for recovery of duty escaped.

Further reliance was placed on Torrent Laboratories Private Limited V/s. U.O.I., 1991 (55) ELT 25 (Gujarat) wherein it is held that recovery of credit wrongly availed of within reasonable period can certainly be effected, in absence of specific period of limitation. The Court further held that provisions of Section 11-A of the Central Excise and Salt Act, 1944 cannot be read into Rule 57I, special provision regarding recovery of Modvat Credit wrongly availed of to which the Legislature did not intend general provisions of Section 11A.

Thus, on the facts of the case, it was held by the High Court that Rule 57-B prescribes no time limit for claiming Modvat Credit. If it is not existed at the initial stage, there is no bar to claim such credit at subsequent stage. The only criteria which is laid down in the Rule is that it should not exceed 90% of the duty paid. An analogy can also be drawn from the provisions contained in Rule 57G of the Central Excise Rules which prescribes the time limit of six months. In any case, no prejudice is caused to the Central Government if the additional credit is allowed to be taken by the assessee. Question answered in favour of assessee and against the Revenue.

Decision:- References disposed of accordingly.

Comments:- This is a good decision as the Rules do not specify any time limit for availment of the credit and so the benefit of the same was provided to the assessee. Even in the current Cenvat credit rules also, no time limit has been prescribed. The only word “immediately” is written in the rules. This does not mean that the credit cannot be taken at a later date.

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PJ/Case Laws/2010-11/1001

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