CX - Makers and framers of Rule 57F did not intend to deny MODVAT credit simply because inputs were not received after job work within 180 days - Period of 180 days cannot be held to be mandatory - Revenue appeal dismissed: HC
By TIOL News Service
MUMBAI, FEB 04, 2015: THIS is a Revenue appeal filed in the year 2004 and which was decided recently.
The Appeal was admitted on the following substantial question of law -
"Whether Rule 57F(4) of the Central Excise Rules is mandatory or directory?"
For the uninitiated, rule 57F(4) of yore was what rule 4(5)(a) of CCR, 2004 today envisages, to a certain extent, of course.
The Respondent had sent the inputs to job workers under Annexure-II Challan on payment of 10% of the value of the inputs as provided under Rule 57F of the Central Excise Rules. However, from January 2000 onwards, the Respondent did not reverse the Modvat credit in respect of the inputs received after the stipulated period of 180 days in terms of rule 57F(11) of the CER, 1944.
Accordingly, a total MODVAT credit of Rs.1,11,543/- allegedly irregularly availed was sought to be recovered from the respondent assessee.
The demand was confirmed by the adjudicating authority but dropped by the Commissioner(Appeals).
The Commissioner(A) had crystallised the issue thus -
"The goods were cleared as per provisions of Rule 57F(4) by debiting 10% of the value inputs. The Assessee availed credit on the goods received back from the job worker after the stipulated period of 180 days. The credit had been taken only after receipt of the goods. The receipt of the goods and the credit taken have also been mentioned in the statutory record, namely, RG23A Part-I and II. These documents have been submitted by the Assessee to the Department along with their monthly returns. Therefore, the facts were known to the Department. This factual position is not disputed. The dispute is, the time period, during which the goods ought to have been received. However, once the basics of MODVAT Cenvat Rules are understood the delay in receipt of the goods is only a procedural infirmity which should not come in the way of taking legitimate credit which is otherwise admissible to the Assessee . …when substantive provisions of law have been complied with, then, non-compliance with the procedural provisions does not result in denial of a relief or benefit which is otherwise and legitimately due to a party."
The Revenue appeal was also dismissed by the CESTAT.
And, therefore, the Revenue is before the High Court.
These are the submissions of the counsel for the Revenue -
| …that the Tribunal completely misread and misinterpreted these Rules. If the Rules contemplate that the inputs or capital goods are cleared to a job worker and they must be received back within 180 days, then, the said period is nothing but mandatory. Thereafter, MODVAT credit was not admissible. This view of the Revenue is in consonance with the language of the Rules. This language denotes as to how manner of utilization of inputs and credit allowed in respect of duty thereon has to be determined. If any disregard to the Rules results in refusal of MODVAT credit, then, the Tribunal should not have accepted the case of the Assessee. Besides that,Tribunal's order is very cryptic and virtually unreasoned, it cannot be sustained. |
The respondent submitted that the view taken by the Tribunal is imminently possible; that it cannot be termed as perverse or vitiated by any error of law apparent on the face of the record & hence the Revenue Appeal should be dismissed.
The High Court jotted the contents of sub-rule 57F(4) onwards till rule 57F(21) of the CER, 1944 and observed -
" …if all these sub-rules are read together and harmoniously as has been done by the Tribunal, then, no other view of the matter is possible. It is not a mandate flowing from the Rules that if the inputs or partially processed inputs are not received within 180 days in the factory of the manufacturer, then, he be disallowed the Cenvat credit and in totality. The Rules provide for situations under which, if the goods are not received back within 180 days, the credit can be adjusted. The proportionate credit can be denied and by calling upon the manufacturer to debit the account. All this would indicate as to how the makers and framers of the Rule did not intend to deny MODVAT credit simply because the inputs were not received after processing or job work within 180 days. The period of 180 days cannot be held to be mandatory. In the given facts and circumstances and going by the language of the Rule, both Commissioner (Appeals) and the Tribunal were right in concluding that the period is not mandatory. The Tribunal's reasoning at page 55of the paper book is in consonance with the language of the Rule and the sub-rules. In these circumstances, the demand made could not have been sustained. The Appeal has rightly been dismissed."
The Revenue appeal was dismissed.
In passing : After almost eleven years, the result is the same for the Revenue. Hope they take it no further!
(See 2015-TIOL-263-HC-MUM-CX)
