UTKAL ASBESTOS LTD Vs. COLLECTOR OF CENTRAL EXCISE

JUDGEMENT

(1.) THIS case has come up before this Larger Bench pursuant to an order of reference by a Two -Member Bench of the Tribunal. The issue before that Bench was as to whether the limitation of six months prescribed under Section 11A of the Central Excises and Salt Act, 1944 (hereinafter referred to as 'the Act') was applicable to a demand under Rule 57E of the Central Excise Rules, 1944 (hereinafter referred to as 'the Rules') for variation of Modvat credit (by way of adjustment in the credit account or, in the event of such adjustment being impossible, by way of payment in cash) consequent to variation of the duty paid on inputs. The Bench considered the Tribunal's earlier decisions in the cases of Bakeman's Home Products Pvt. Ltd. v. Collector of Central Excise 1990 (48) E.L.T. 518 and Arvind Detergents Ltd. v. Collector of Central Excise 1987 (10) ECR 44 and observed that these decisions needed to be reviewed in the light of the Supreme Court's decision in the case of Government of India v. Citedal Fine Pharmaceuticals and Ors. 1989 (24) ECR 440 (S.C.)

(2.) IN Bakeman's Home Products (supra), the Tribunal had dealt with a case of credit taken on input by a biscuit -manufacturer under Notification No. 201/79, dated 4 -6 -1979. A subsequent decision of the Delhi High Court rendered the input exempt from duty and consequently the duty paid on such input was refunded to the input -manufacturer. The Department, by invoking proviso (3) to the Notification, sought to recover the amount of credit taken in respect of the input by the biscuit -manufacturer. Proviso (3) to Notification No. 201/79 contained a provision similar to Rule 57E of the Rules. Like Rule 57E, the said proviso (3) prescribed no period of limitation for such recoveries. The Tribunal held that, in the absence of mention of period of limitation in proviso (3) to the Notification, any notice of demand of duty under the proviso would be subject to the limitation provisions contained in Section 11A of the Act.

(3.) IN Arvind Detergents (supra), the appellants manufactured 'Sunlight' soap tablets from duty -paid 'Sunlight' soap noodles (inputs) supplied by M/s. Hindustan Liver Ltd. and cleared the 'tablets' on payment of duty to M/s. HLL. They had permission from the Department to take pro -forma credit of the duty already paid on the 'noodles' by M/s. HLL. They took such credit of duty on a certain quantity of the soap noodles received from M/s. HLL. Subsequently, M/s. HLL received a rebate of duty on the said quantity of soap noodles. The Department thereafter sought to recover from the appellants an amount equal to the rebate granted to M/s. HLL, by invoking the proviso to Sub -rule (20) of Rule 56A of the Rules. This proviso, which contained a provision similar to Rule 57E, did not prescribe any period of limitation for recoveries thereunder. The question arose before the Tribunal as to whether the demand made in the show cause notice issued to the appellants under the said proviso was time -barred or not. The Tribunal answered the question in the affirmative after holding that any recovery contemplated under the proviso to Sub -rule (2) of Rule 56A should be made within the period of limitation prescribed under Sub -rule (5) of the said Rule. The period of limitation so prescribed was six months from the date of taking credit. This provision was contained in Clause (i) of the Rule 56A(5) which had some semblance of the provisions of Section 11A(1) of the Act.