ORDER
V.P. Gulati, Member (T)
1. This appeal is against the order of the Collector of Central Excise, Trichy. Under the impugned order the appellants have been denied the re-credit of the Modvat credit earlier expunged when the finished products were cleared without payment of duty, in terms of Rule 57C of the Central Excise Rules even though subsequently the duty was charged in respect of these goods earlier allowed free of duty. As seen from the records the appellants had taken Modvat credit on the inputs Aluminium Ingots and had used them for the manufacture of Aluminium Castings, the finished notified goods cleared by the appellants. The price list exempting Aluminium Castings from payment of duty was also approved. The appellants since they were using the inputs namely Aluminium Ingots for the manufacture of Aluminium Castings cleared free of duty, expunged the credit relating to the inputs contained in these castings. Subsequently, however, these castings were held by the learned lower authority to be assessable under Chapter Headings 84, 85, 86, 87 and 90 and in respect of which there is no dispute before me. The duty therefore was demanded and paid in respect of these castings which were earlier cleared free of duty. The appellants before me are not disputing the re-assessment of goods and the only plea urged is that the Modvat credit which was earlier expunged should be restored to them as the final products had suffered duty. The learned Collector (Appeals) in his order while turning down the appellants’ plea for re-credit has observed as under :
“Rule 57E provides for adjustment of duty paid credit in case there is a variation in duty paid on any inputs. Thus, the situation in the present case is not covered by Rule 57E or any other provision of Modvat scheme. Therefore, Modvat credit expunged by the appellants earlier cannot be reversed for want of any enabling legal provision.”
2. The learned representative of the appellant has pleaded that as it is Rule 57E provides for variation of the credit in case the inputs received are found to be chargeable at the rate, lower or higher than charged earlier at the time when the inputs were cleared from the premises of the supplier. He pleaded therefore that there is no legal bar to the variation of the credit where the goods are held to be dutiable later at a higher rate.
3. The learned JDR for the Department pleaded that Rule 57E provides for variation of the credit where the rate of duty is varied subsequent to the receipt of the inputs in the assessee’s factory and it does not cover a contingen-cy of the type in this case.
4. I have considered the pleas made by both the sides. The reading of the orders of the learned lower authorities shows that the appellants’ eligibility to take Modvat credit in respect of Aluminium Ingots is not in question. The appellants, based on the classification list approved, reversed the Modvat credit relatable to the quantum of inputs contained in Aluminium Castings cleared without payment of duty. After this was done, the authorities, however, have chosen to re-assess the castings earlier cleared free of duty under Chapter Headings 84,85,86,87, & 90 and have held them to be not eligible for clearance on ‘nil’ rate of duty under sub-heading 7616.90 read with Notification 180/88. The appellants have sought for re-credit of the amount which was earlier expunged as how the Department has asked for duty to be paid in respect of -these castings. So far as the appellants’ eligibility to take Modvat credit in respect of the castings is concerned, there is no legal objection. There is no plea that the castings had not been declared before the authorities in the declaration filed under Rule 57G. The only ground on which the appellants have been ruled out by learned lower authority is that there is no specific provision for restoration of the credit earlier expunged in case the Department chooses to charge duty in respect of the goods which were allowed earlier to be cleared at ‘nil’ rate of duty on the basis of the approved classification list. It is observed that the appellants’ eligibility to take Modvat credit gets established the moment it can be shown by the appellants that the inputs and the finished products in or in relation to which the same are to be used are notified under 57A and have followed the necessary procedures for taking the Modvat credit. The appellants had operated under the Modvat rules and expunged the Modvat credit as mentioned above, when the castings were cleared free of duty based on an approved price list. The moment the Department has chosen to charge duty in respect of the castings the appellants are restored back to the original position for eligibility to the Modvat credit. The appellants would be within their rights to claim the restoration of the Modvat credit earlier expunged within a period of 6 months from the payment of duty in respect of the castings. We have held in a number of cases where for any particular contingency the period of limitation is not provided, the limitation of 6 months can be applied as this period can be considered as a reasonable period taking into consideration the Scheme of the Central Excise Act and Rules following the ratio of the Hon’ble Supreme Court in the case of Citadel Fine Pharmaceuticals wherein it has been held as under :
“Learned Counsel appearing for the respondents urged that Rule 12 is not reasonable and violative of Article 14 of the Constitution, as it does not provide for any period of limitation for the recovery of duty. He urged that in the absence of any prescribed period for recovery of the duty as contemplated by Rule 12, the officer may act arbitrarily in recovering the amount after lapse of long period of time. We find no substance in the submissions. While it is true that Rule 12 does not prescribe any period within which recovery of any duty as contemplated by the Rule is to be made, but that by itself does not render the Rule unreasonable or violative of Article 14 of the Constitution. In the absence of any period of limitation it is settled that every authority is to exercise the power within a reasonable period. What would be reasonable period, would depend upon the facts of each case. Whenever a question regarding the inordinate delay in issuance of notice of demand is raised, it would be open to the assessee to contend that it is bad on the ground of delay and it will be for the relevant officer to consider the question whether in the facts and circumstances of the case notice of demand for recovery was made within reasonable period. No hard and fast rules can be laid down in this regard as the determination of the question will depend upon the facts of each case.”
I therefore order that subject to the limitation as above the appellants would be eligible to the Modvat credit as prayed for, Ordered accordingly and the appeal is allowed in the above terms.