Customs, Excise and Gold Tribunal - Delhi
Utkal Asbestos Ltd. vs Collector Of Central Excise on 2 May, 2000
Equivalent citations: 2000(70)ECC98, 2000(120)ELT235(TRI-DEL)
ORDER P.G. Chacko, Member (J)
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 & 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.
4. In Government of India v. Citedal Fine Pharmaceuticals (supra), the Apex Court held that, in the absence of any prescribed period of limitation, every authority was to exercise its power within a reasonable period and that such period would depend on the facts of the particular case.
5. According to the Referring Bench, the above ruling of the Apex Court held the key to resolution of the question as to what would be the period of limitation for a demand under Rule 57E. After considering the two parameters of the period of limitation prescribed under Section 11A of the Act viz. the length of the period and its starting point, the Bench observed that it would be inappropriate to apply the limitation provisions of Section 11A to proceedings under Rule 57E. The Referring Bench, further, noted that an issue, identical with the one which had been decided upon by the Tribunal in Bakeman's Home Products (supra) was pending before the Supreme Court vide 1994 (69) E.L.T. A199. The Bench therefore felt that the issue which arose before it should be examined by a Larger Bench in the light of the Apex Court's ruling in Citedal Fine Pharmaceuticals (supra).
6. The brief facts of the case necessary for a decision on the referred issue are as follows : The appellants namely M/s. Utkal Asbestos Ltd. were manufacturers of asbestos cement products falling under Chapter sub-heading 6804.10 of the Schedule to the Central Excise Tariff Act, 1985 and were availing the facility of Modvat credit on inputs under Section 57A of the Central Excise Rules, 1944 during the period of dispute (April-May 1987). One of the inputs used for the manufacture of their final products was cement. The appellants purchased 1646.800 M.T. of cement from M/s. Modi Cement Ltd. (hereinafter referred to as the input-manufacturers) during the above period. They took Modvat credit of the Central Excise duty paid by the input-manufacturers on the said quantity of cement @ Rs. 225/- per M.T. on the strength of valid documents (gate passes). Subsequently Department found that the correct rate of duty leviable on cement at the relevant time was Rs. 175/- per M.T. only in terms of a Notification and therefore refunded the excess amount of duty paid by the input-manufacturers in adjudication of a refund claim filed by them. The total amount so refunded was Rs. 82,340/-. Department treated the credit to the extent of Rs. 82,340/- taken by the appellants as a short levy of duty on their final products and, by show cause notice dated 19-8-1988, directed the appellants to show cause why the said amount should not be recovered from them under Rules 57E and 57-I of the Rules read with Section 11A of the Act. The appellants contested the above demand on merits as well as on the ground of limitation. They contended that the demand in the show cause notice issued beyond the period of six months from the date of taking of the Modvat credit in RG 23A register was time barred. They also submitted that Rule 57-I of the Rules was not invocable against them to recover the above amount of credit which had been rightly taken and utilised in a regular manner. The Assistant Collector of Central Excise, who adjudicated the dispute, confirmed the demand under Rules 57E and 57-I read with Section 11A and directed the party to pay the amount by way of adjustment in the credit account maintained under Rule 57G(3) or by way of remittance in cash. Against this order of the Assistant Collector, the appellants preferred appeal to the Collector of Central Excise (Appeals) and the latter sustained the Assistant Collector's order under Rule 57E after rejecting the appellants' plea of limitation on the ground that there was no time limit prescribed under Rule 57E. The lower appellate authority however, held that Rule 57-I was not invocable on the facts of the case and the limitation provisions of Section 11A of the Act were not applicable to situations envisaged under Rule 57E. The appeal with which we are presently concerned is against this order of the lower appellate authority.
7. The inputs in respect of which demand was raised by Department were received in the appellants' factory during April-May, 1987. The Modvat credit on such inputs was taken by the appellants in their RG 23A Part II during the said period or shortly thereafter. The refund of duty of Rs. 82,340/- was made to the input-manufacturers by the jurisdictional Assistant Collector of Central Excise some time in January, 1988. The show cause notice raising the demand of duty of Rs. 82,340/- on the appellants was issued by the Department on 19-8-1988. From these facts, which are not disputed, we have noted that the Department raised the said demand of duty on the appellants after a period of about 15-16 months from the dates of taking of Modvat credit by the party and also that the demand was made after a period of about 7-8 months from the date on which the refund of duty was made by Department to the input-manufacturers.
8. We have heard ld. Consultant for the appellants and ld. DR for the respondent-Revenue. We have also heard ld. Advocate Shri V. Sridharan as intervener who has argued in support of the assessees. Ld. Consultant has, after ruling out the applicability of Rule 57-I to the Department's demand in question, conceded that Rule 57E was applicable to the demand and has further submitted that, in the absence of mention of any period of limitation under this rule, any demand under the rule would be subject to the limitation provision under Section 11A(1) of the Act. According to him, the period of six months prescribed under Section 11A(1) is a reasonable period for purposes of Rule 57E. He has relied on the Tribunal's decision in Bakeman's Home Products (supra) and the Supreme Court's decision in Citedal Fine Pharmaceuticals (supra). Ld. Advocate Shri Sridharan would not rule out Rule 57-I. He has argued that, in the event of Section 11A(1) being held to be inapplicable to demands under Rule 57E, the limitation provisions of Rule 57-I should be applied to such demands. He has also stressed the point that, in any case, the period of limitation should commence from the date of taking credit and not from the date of refund of duty to the input manufacturers. Ld. Advocate has placed reliance on the Tribunal's decisions in Bakeman's Home Products (supra), Premier Tyres Ltd. v. CCE, Cochin 1986 (26) E.L.T. 42 and TELCO v. CCE, Bombay 1996 (87) E.L.T. 157. He has also relied on the Bombay High Court's decision in the case of Bharat Bijlee Ltd. v. CCE, Bombay 1996 (83) E.L.T. 496 (Bom.). Ld. DR has countered all the above arguments by submitting that Rule 57-E is an independent provision of law which is not subject to anything contained in Rule 57-I or Section 11A. He has drawn support to this submission from the Tribunal's decision in the case of TELCO (supra). Ld. DR has further contended that, in the absence of prescription of period of limitation under Rule 57E, any demand for adjustment in credit account or payment in cash under Rule 57E can be made within a reasonable period from the date on which the cause of action for such demand arose. In the instant case, the cause of action for the demand for reversal of Modvat credit to the extent of Rs. 82,340/- was the refund of duty to the input-manufacturers and the show cause notice raising such demand was issued within a period of 7-8 months from the date of the refund which, according to ld. DR, was a reasonable period on the facts and in the circumstances of the case. Ld. DR has, in this context, relied on the Apex Court's decision in Citedal Fine Pharmaceuticals (supra).
9. The issue referred to us is whether the period of six months prescribed as limitation for demands under Section 11A(1) of the Act is applicable to a demand under Rule 57E of the Rules for variation of Modvat credit consequent to variation of duty paid on inputs. Rule 57-I does not figure anywhere in this issue. This is because the lower appellate authority's finding that Rule 57-I was not applicable to the facts of the case has become final inasmuch as there is no challenge in the present appeal against such finding. Ld. Advocate has sought to broaden the issue by introducing Rule 57-I and arguing that the limitation provisions of this rule should be held to be applicable to demands under Rule 57E in the event of applicability of Section 11A(1) being ruled out. We shall consider the arguments of ld. Advocate also and render our view thereon, having regard to the fact that he has relied on a High Court decision to establish his point.
10. Rule 57E as it stood on the date of issue of the show cause notice in question reads as follows:
"If duty paid on any inputs in respect of which credit has been allowed under Rule 57A, is varied subsequently due to any reason resulting in payment of refund to or recovery of more duty from the manufacturer or importer, as the case may be, of such inputs, the credit allowed shall be varied accordingly by adjustment in the credit account maintained under Sub-rule (3) of Rule 57G or in the accounts maintained under Rule 9 or Sub-rule (1) of Rule 173G; Or if such adjustment is not possible for any reason, by cash recovery from or, as the case may be, refund to the manufacturer availing of the credit under Rule 57A."
This rule provided for variation of the credit of duty on inputs already allowed to a manufacturer of final products who used such duty-paid inputs for the manufacture of final products. Such variation could be occasioned either by a refund of duty (paid on such inputs) to the input-manufacturer/importer for any reason or by a recovery of an additional amount of duty (on such inputs) from the input-manufacturer/importer. In either of the two situations, the variation of credit should be effected in the normal course by adjustment in the appropriate account maintained by the manufacturer of final products. Where such adjustment in account was not possible for any reason, the variation of credit would be effected by cash recovery from the manufacturer of final products. The rule, however, did not prescribe any period of limitation for demands for variation of credits.
11. In the present case, the appellants took credit on a certain quantity of cement (input) supplied by a cement-manufacturer on payment of duty @ Rs. 225/- per M.T. This credit was taken by the appellants rightly and in a regular manner and was duly allowed to them by the competent Central Excise authority. The credit was taken and utilised for payment of duty on final products during April-May, 1987 or shortly thereafter. An amount of duty of Rs. 82,3407- paid on the above quantity of cement by the cement supplier @ Rs. 50/- per M.T. was found to be excess and the same was refunded to them by the Department some time in January 1988. The Department sought to recover this amount from the appellants who had taken credit of duty on the above input @ Rs. 225/- per M.T. as aforesaid. It was for this purpose that the Department issued the show cause notice dated 19-8-1988. This was after more than six months from the date of taking credit.
12. The demand in the show cause notice, as confirmed by the adjudicating and first appellate authorities, is admittedly one under Rule 57E. The immediate question before us is whether such a demand will be hit by the limitation prescribed under Section 11A of the Act in the absence of any period of limitation prescribed under Rule 57E. Sub-section (1) of Section 11A (excluding the Proviso and Explanation thereto, which are not relevant for the present purpose) reads thus:
11A. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded. - (1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a Central Excise Officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice.
The dues which can be recovered under the above provision of law are duties not levied or not paid or short-levied or short-paid or erroneously refunded. Any demand for such recovery should, in the normal course, be made within six months from the relevant date. "Relevant date" has been defined under Sub-section (3). The cause of action for a demand under Section 11A is non-levy, non-payment, short-levy, short-payment or erroneous refund. In the appellants' case there was no refund of any duty to them, nor did any of the other four contingencies exist. When they paid duty on their final products by availing credit of the duty paid on cement (input) by the manufacturer thereof, the entire amount of the duty paid on the input @ Rs. 225/- per M.T. by the input-manufacturer was in the hands of the Revenue and, therefore, there was no case of non-levy, non-payment, short-levy or short-payment as on the date of payment of duty by the appellants on their final products. Any subsequent refund of any part of the duty paid on the input, to the input-manufacturer could not, ipso facto, give rise to a case of 'short-levy' or 'short-payment' for the Department to invoke Section 11A against the appellants, though such refund would certainly give rise to a cause of action for invoking Rule 57E against them. Recovery of short-levied or short-paid duty contemplated under Section 11A cannot be equated, or even analogized, with variation of credit of duty provided for under Rule 57E. The two are different in purport and context. It may not, therefore, stand to reason that, in the absence of mention of period of limitation under Rule 57E, the provision of limitation meant for proceedings under Section 11A is applicable to proceedings under Rule 57E.
13. Section 11A had come into force on 17-11-1980. Section AA of Chapter V of the Central Excise Rules laying down what is called "the Modvat Scheme" came into force on 1-3-1986. It contains Rules 57A to 57J. Rule 57A deals with applicability of the provisions of the said Section AA and lays down the broad scope and contours of the Modvat scheme. The contours of the scheme are defined and delineated in the remaining rules in the section. Each of the succeeding rules deals with a specific aspect or ingredient of the scheme, which enables manufacturers of specified final products to take credit of the duty paid on specified inputs for the purpose of utilising the credit towards payment of duty leviable on the final products. Rule 57G deals with the procedure to be observed by the manufacturers of finished goods for the purpose of taking the credit on the inputs used for the manufacture. Rule 57E deals with adjustment of the credit consequent to variation of the duty paid on the inputs. Rule 57-I deals with recovery of credit wrongly availed of or utilized in irregular manner. This rule did not contain any limitation provision applicable to such recoveries till the rule was amended on 6-10-1988. This amendment introduced a period of limitation of six months similar to the one provided under Section 11A of the Act. Though Rule 57E (which also provided for cash recovery of duty in a certain situation) was also amended from time to time no provision of limitation was inserted in the rule at any stage nor was it said anywhere in Section AA ibid that the limitation provision of Section 11A would be applicable to adjustment or recovery of credit under Rule 57E. The Modvat scheme embodied in Section AA ibid is a self-contained scheme. Every aspect of the scheme is fully taken care of by one or the other rule contained in the said Section AA. Situations resulting from variation of the duty paid on specified input by the manufacturer thereof, subsequent to availment of credit of such duty by a manufacturer of specified final products, are fully covered by Rule 57E, which enables the Department to require the manufacturer of final products to make corresponding variation of credit by adjustment in the appropriate account or by cash payment. It is true that the rule does not prescribe any period of limitation for such a departmental requisition or demand. But it is also true; as rightly submitted by ld. DR, that no legislative intent can be read into Rule 57E for making its provisions subject to the limitation clause contained in Section 11A of the Act. Indeed, the amendment of Rule 57-I brought about on 6-10-1988 has to be seen as an indication of non-applicability of limitation provisions of Section 11A to recovery proceedings under Modvat rules.
14. It is also pertinent to note, in this context, that the 'relevant date' defined under Section 11A as the starting point of the period of limitation for recoveries of duty under that Section is a misfit for the factual situations contemplated under Rule 57E. In the appellants' case, the cause of action arose for a demand under Rule 57E on the date on which the amount of duty of Rs. 82,3407- paid on the input was refunded to the input-manufacturer and that date was not attracted by the meaning of 'relevant date' under Section 11 A.
15. Ld. Advocate has argued that Section 11A is an omnibus provision meant to serve the purposes of all kinds of demands of duty under the Act and the Rules and, since no period of limitation is specifically prescribed for demands under Rule 57E, the limitation clause of Section 11A should be applied. We cannot agree with this argument for the reasons already recorded. The case law cited by him would not persuade us to accept the argument. In Bakeman's Home Products (supra), as we have noted earlier in this order, the impugned demand was one made under proviso (3) to Notification No. 201/79, dated 4-6-1979. That Notification had provided for credit of duty paid on certain inputs and the 3rd proviso thereto contained a provision similar to the one contained in Rule 57E now under consideration - for variation of the credit consequent to variation of the duty paid on the inputs. The Tribunal (2 Member Bench) followed the decision of a 3 Member Larger Bench given in Premier Tyres Ltd. v. CCE, Cochin (supra) and held that, in the absence of period of limitation prescribed in the proviso any demand under the proviso would be subject to the limitation clause of Section 11A of the Act. In the case of Premier Tyres, the issue before the Larger Bench was whether Section 11A would be applicable to a demand under para (4) of Appendix to the above Notification. The said para (4) contained a provision for recovery of credits wrongly taken of duty paid on inputs, similar to the provision contained in Rule 57-I before its amendment of 6-10-1988. The former, like the latter, did not prescribe any period of limitation for recovery of wrongly taken credits of duty on inputs. The Larger Bench decided the aforesaid issue by holding that Section 11A would be applicable to a demand under para (4) of the Appendix to the Notification ibid. The Bench, while holding so, was following the ruling of Bombay High Court in Zenith Tin Works (P) Ltd. v. Union of India and Ors. 1986 (23) E.L.T. 357. The High Court had held in that case that a demand for recovery of erroneously availed credit of duty already paid on inputs was a demand for short-levied duty.
The decision of the Tribunal in Premier Tyres (supra) was on the question of applicability of Section 11A to recovery of wrongly taken credit under para (4) of the Appendix to the Notification and not on any question of applicability of the said Section to any demand for variation of credit under the 3rd proviso to the Notification. It was the latter question which arose in the case of Bakeman's Home Products (supra) in which the Tribunal followed the Larger Bench decision in Premier Tyres on the former question, without establishing any analogy between the two questions. It follows that the ratio of Premier Tyres was not correctly applied by the 2 Member Bench in Bakeman's Home Products. We have already taken a view on the question of applicability of Section 11A to a demand under Rule 57E, which question is analogous to the one which was considered in Bakeman's Home Products. In the light of our view, we would observe that the decision rendered in Bakeman's Home Products was not a correct proposition of law. As regards Premier Tyres (supra), we have noted that the question which had arisen in that case was different from the one which arose in Bakeman's Home Products and, for that matter, is not analogous to the aforesaid question before us in the present case. Therefore, the ratio of the Larger Bench decision in Premier Tyres is not applicable to the present case.
16. Ld. Advocate has also relied on the decision of the Tribunal in TELCO's (supra) case. In that case, a 3 Member Larger Bench of this Tribunal considered the scope of the Modvat rules contained in Section AA of Chapter V of the Central Excise Rules. After observing that Rule 57G(2) entitled a manufacturer (who had filed a declaration and obtained a dated acknowledgement of the same under Sub-rule 1) to take credit of the duty paid on the inputs, the Bench proceeded to consider the effect of Rule 57E on the manufacturer's right under Rule 57G(2) and held as follows :
Rule 57G itself enables the manufacturers of final products to take credit of duty paid by manufacturers of inputs subsequent to clearance of inputs. The same must necessarily be the position when on account of variation of duty refund is made to the manufacturer of inputs. Such variation amounts to correction of entry relating to quantum of duty in the documents referred to in the first proviso to Rule 57G(2). Since the right of the manufacturer of final products is to take credit of the actual and correct amount of duty, where he has taken excess credit on the basis of the documents aforesaid, he has an inherent obligation to reverse the excess credit or pay the excess amount; that being so, in the event of his failure to do so, the department has right to direct him to do the right thing, namely, to reverse the excess credit or pay the excess amount. There is no difficulty in doing this, if the assessment on monthly RT 12 return has not been completed. Even if such assessment is completed, the department can have recourse to general provisions of Section 11A of the Act.
The Bench further observed : "On such an understanding of Rule 57G, it is manifest that the intention underlying Rule 57E is to state expressly what is clearly implicit in Rule 57G. Rule 57E is merely clarificatory in its ambit...Aharmonious reading of Rules 57G and 57E in the light of the broad contours of the scheme contained in Rule 57A makes it manifestly clear that Rule 57E is clarificatory in content and procedural in nature, indicating the procedure to be adopted in such case...."
Ld. Advocate's emphasis is on the view expressed by the Bench in the sentence : "Even if such assessment is completed, the department can have recourse to general provisions of Section 11A of the Act." This view, in our opinion, is not well-founded. The order of the Bench does not give any reasoning for such a view. We respectfully disagree with the view taken in TELCO that the provisions of Rule 57E are implicit in Rule 57G and therefore Rule 57E is only clarificatory. Such a view appears to be inconsistent with what the Bench correctly understood of the import of the Modvat rules as stated in an earlier part of its order thus :
The contours of the scheme are defined and delineated in the remaining Rules in the Section. The meaning and content of the scheme have to be gathered from a harmonious reading of all the relevant Rules in the Section. Each of the succeeding Rules deals with a specific aspect or ingredient of the scheme. To find out any particular facet or aspect of the scheme other than the definition of "input", the provisions of the appropriate succeeding Rule have to be looked into though the relevant Rule has to be understood in harmony with the contours of the scheme and the other provisions of the scheme. It is clear that Rule 57A does not create or vest any right in any one. Rights, duties and liabilities have to be traced to the succeeding Rules understood in the light of Rule 57A.
One of the 'succeeding rules' is Rule 57E which contains a provision for variation of credit on inputs consequent to variation of the duty paid on such inputs. The rule contemplates that such variation of the duty paid on inputs can occur by way of a refund of the duty or part thereof to, or a recovery of more duty from, the input-manufacturer. It also visualises that such refund or recovery may take place due to any reason and at any time subsequent to the original payment of duty on the inputs. The rule also lays down the manner in which the variation of credit shall be effected at the end of the input-consuming/credit-taking manufacturer. These provisions contained in Rule 57E represent a particular aspect of the Modvat scheme which cannot be said to be implicit in Rule 57G or any other rule. For this reason, we hold the view that Rule 57E is a substantive provision of law reflecting a particular aspect of the scheme and cannot be discounted as clarificatory to any other rule. The view taken in TELCO's case is not correct in our opinion.
17. Rule 57E is, of course, procedural too. The non-mention of any period of limitation for the variation of credit under the rule appears to be only a legislative short-coming in the procedural part of the provisions of the rule. In such a situation, however, Department cannot successfully plead that they can invoke the rule against an assessee (who has taken credit of the duty paid on inputs, rightly and in a regular manner) after any length of time after variation of the duty paid on the inputs, for, such a plea would do violence to the very purport of the Modvat scheme. They have got to make any demand for variation of credit under the rule within a reasonable period from the date on which the cause of action for such demand arises, i.e. the date of refund of duty to, or recovery of more duty from, the input-manufacturer. This reasonable period would depend on the facts of the particular case.
18. The cause of action for the subject show cause notice in the instant case as we have already noted was the refund of duty of Rs. 82,340/- by the Department to the input-manufacturer some time in January 1988. The show cause notice was issued within a period of 7-8 months from the date on which the refund was made. During the interregnum between the date of refund and that of the show cause notice, Department had issued a letter to the party directing them to pay the amount of Rs. 82,340/-. It appears that the Department wanted to give them a fair chance for the payment before enforcing Rule 57E against them. In such facts and circumstances, in our view, the above period of 7-8 months was a reasonable period for issue of the subject show cause notice. The decision of the Honourable Supreme Court in the case of Government of India v. Citedal Fine Pharmaceuticals (supra) would be squarely applicable as rightly submitted by ld. DR. In the said case before the Apex Court, the question was whether Rule 12 of the Medical and Toilet Preparations (Excise Duties) Rules 1956, which provided for recovery of short-levied duty but did not provide for any period of limitation for such recovery of duty, was ultra vires the parent Act. The Apex Court answered the question in the negative after holding as under:
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.
19. Ld. Consultant has urged that the period of six months prescribed under Section 11A(1) of the Act should be held to be the reasonable period for the purpose of Rule 57E. He has claimed support for this plea from the decision of 3-Member Larger Bench of this Tribunal in the case of Brakes India Ltd. v. CCE, Madras 1996 (15) RLT 68]. Ld. DR has opposed this plea as well, on the strength of the Apex Court's ruling in Citedal Fine Pharmaceuticals (supra). We have perused the order in Brakes India Ltd. what was held in that case in relation to Rule 57E was that, in the absence of prescription of limitation under the said rule six months would be a reasonable period of limitation in the facts and circumstances of the case (emphasis supplied). The Bench relied on the ratio of the Apex Court's decision in Citedal Fine Pharmaceuticals (supra). The view taken by the Tribunal in Brakes India Ltd. by relying on the Apex Court's ruling was quite correct and has fully supported the Revenue's contention before us.
20. We shall now advert to ld. Advocate's alternative argument that, in the event of Section 11A being held inapplicable to proceedings under Rule 57E, the limitation provision of Rule 57-I should be held to be applicable to such proceedings. He has referred to the erstwhile Rule 56A which contained provisions of what was called 'proforma credit' scheme - the precursor of the present 'Modvat credit' scheme and has argued that departmental demands for variation of credit under Rule 57E should be held to be subject to the period of limitation prescribed under Rule 57-I (as amended on 6-10-1988) following the ratio of the decision of the Bombay High Court in the case of Bharat Bijlee Ltd. v. CCE, Bombay 1996 (83) E.L.T. 496 (Bom.) wherein the High Court had held that a demand for variation of proforma credit taken of the duty paid on input, under proviso (3) to Sub-rule (2) of Rule 56A should be made within the period of limitation of six months prescribed under Clause (i) of Sub-rule (5) of that rule. After pointing out that Rule 57E and Rule 57-I presently under consideration in the instant case contain provisions similar to those contained in the said proviso (3) to Rule 56A(2) and Rule 56A(5)(i) respectively, Shri Sridha-ran has drawn our attention to the facts of the case of Bharat Bijlee Ltd. to buttress his point.
M/s. Bharat Bijlee Ltd. (in short, M/s. Bijlee) had purchased from M/s Devidayal Electronics and Wires Ltd. (in short, M/s. Devidayal) duty-paid copper strips (input) which were required for manufacture of transformers (final products). They availed what was called 'proforma credit' of the duty paid on the input, under Rule 56A(2) of the Rules. Subsequently, the duty paid in the copper strips was refunded to M/s. Devidayal by the Department consequent to a decision of the Bombay High Court holding that copper strips were classifiable under Tariff Item No. 26A. Thereafter, the Department, by show cause notice, call upon M/s. Bijlee to show cause why the amount of the proforma credit should not be recovered from them. The party contested the show cause notice on the ground of limitation by submitting that the show cause notice having been issued beyond a period of six months from the date of availment of the proforma credit was time-barred. The jurisdictional Assistant Collector of Central Excise confirmed the demand. However, in appeal filed by M/s. Bijlee against the Assistant Collector's order, the Collector of Central Excise (Appeals) held that the proposed recovery of duty was not permissible after a period of six months. Against this order of the Collector (Appeals), the Department moved this Tribunal. The Tribunal as per the order reported in 1987 (27) E.L.T. 442 held that the demand of duty as raised in the show cause notice under the third proviso to Rule 56A(2) shall have to be made within the period of limitation of six months prescribed under Rule 56A(5) and since the show cause notice was issued within such period from the date of order of refund of duty to M/s. Devidayal, the demand was not time-barred. The Tribunal further held that any recovery of duty under the third proviso to Rule 56A(2) ibid was not subject to the limitation provisions of Section 11A of the Act. A question of law arose out of the Tribunal's decision and the same was referred to the High Court of Bombay. This reference was answered by the High Court in the case of Bharat Bijlee Ltd. (supra) cited by ld. Advocate, as follows:
"On the facts and in the circumstances of the case, the provisions of Sub-rule (5) of Rule 56A of Central Excise Rules, 1944 are applicable to the recovery contemplated in the proviso to Sub-rule (2) of rule 56A and not Section 11A of the Central Excises and Salt Act; 1944."
21. For the purpose of the above decision, the High Court had considered Rule 56A(2) and the third proviso thereto. The provisions of Rule 56A(2) were similar to the provisions contained in the Rule 57A of the Rules, while the provisions of the said third proviso were similar to the provisions contained in Rule 57E as it stood during the period relevant to the case before us. Like Rule 57E, the third proviso to Rule 56A(2) did not contain mention of any period of limitation for variation of credit. However, under Rule 56A(5)(i), a period of limitation of six months from the date of taking credit had been prescribed for recovery of credits allowed under Sub-rule (2) on account of error, omission or mis-construction on the part of Central Excise officer. The High Court held that this period of limitation prescribed under Rule 56A(5)(i) was applicable to demands for variation of credits under the third proviso to Rule 56A(2) also.
22. Ld. Advocate has submitted that the provisions of the erstwhile Rule 56A(5)(i) considered by the High Court have been incorporated into Rule 57-I as amended on 6-10-1988 and that the provisions of the third proviso to Rule 56A(2) were incorporated into Rule 57E as it stood at the time relevant to the case before us. In the light of this fact, he has contended that since the limitation provisions contained in Rule 56A(5)(i) were held to be applicable to the Department's demand for variation of credit under the third proviso to Rule 56A(2) of the erstwhile Proforma Credit Rules, the period of limitation prescribed under Rule 57-I as amended w.e.f. 6-10-1988 should be held to be applicable to departmental demands for variation of credits under Rule 57E. We have noted that this argument is rather of an academic nature inasmuch as during the period relevant to the case before us, there was no period of limitation prescribed under Rule 57-I. Even if the argument is considered for academic purposes, we observe, Rule 57E occupies a field different from that of Rule 57-1 and therefore any demand under the former rule cannot be subject to the limitation clause contained in the latter rule even after 6-10-1988. The two rules stand on different footings and operate in different factual situations, independently of each other. We have already discussed the purposes of Rule 57E. The other rule is meant for recovery of Modvat credits taken wrongly or utilised irregularly. A correct understanding of the Modvat scheme would reveal the fallacy of holding that Rule 57E should operate subject to the limitation clause contained in Rule 57-I. We are therefore unable to accept ld. Advocate's plea for allying Rules 57E and 57-I for limitation or other purposes. We have contextually noted that in the case of Arvind Detergents (supra) which also was considered by the Referring Bench, the view taken by the Tribunal was one which is similar to the view taken by the Bombay High Court in Bharat Bijlee Ltd. This view would not stand in our way when we hold for reasons already recorded, that the limitation clause contained in Rule 57-I as amended w.e.f. 6-10-1988 is not applicable even to post 6-10-1988 demands under Rule 57E.
23. Ld. Advocate has also sought to draw support from Bharat Bijlee Ltd. to his argument that the period of limitation for recoveries under Rule 57E should commence from the date of taking of credit and not from the date of refund of duty paid on the inputs, to the input-manufacturer. It is true that, in that case, the High Court held that a notice of demand under Rule 56A(2) served on the assessee beyond six months from the date of taking credit would be time-barred. The High Court, in holding so, was only stating the express provision contained in Rule 56A(5)(i). We have already ruled 3 out any procedural nexus between Rules 57E and 57-I. We would, a fortiori, do likewise as between Rule 57E and erstwhile Rule 56A(5)(i). Therefore, the above ruling of the court in terms of the express provisions of Rule 56A(5)(i) cannot be applied to the situation in the case before us where the demand under Rule 57E is not subject to any specified period of limitation. We have already held that the cause of action for recovery of credits on inputs under Rule 57E is the refund of the duty paid on such inputs, to the input-manufacturer. Similarly, the cause of action for allowing more credit on inputs under Rule 57E is the recovery of more duty on such inputs from the input-manufacturer. This position is abundantly clear from the very text of Rule 57E extracted earlier in this order. On the other hand, a cause of action for recovery under Rule 56A (5)(i) arose when a credit of duty was allowed on account of error, omission or misconstruction on the part of excise officer, and, perforce, the date of taking the credit came to be recognised as the date of commencement of the period of limitation for such recovery. We do not see any parity between this rule and Rule 57E with regard to date of commencement of period of limitation. Therefore, ld. advocate's argument that the period of limitation for recovery under Rule 57E should commence from the date of taking credit cannot be sustained. The High Court's decision in Bharat Bijlee Limited (supra) would not support such an argument.
24. We have already held that the show cause notice in question was issued within a reasonable period from the date on which the refund of duty paid on the inputs was made to the input-manufacturers. Accordingly the referred issue stands answered in favour of the Revenue by application of the Hon'ble Supreme Court's ruling in Citedal Fine Pharmaceuticals (supra). In the light of this, the order of the lower appellate authority has to be upheld. We order accordingly and reject the appeal.