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2012 (284) E.L.T. 202 (Tri. - Chennai)

IN THE CESTAT, SOUTH ZONAL BENCH, CHENNAI
Ms. Archana Wadhwa, Member (J) and Dr. Chittaranjan Satapathy, Member (T)
COMMISSIONER OF CENTRAL EXCISE, CHENNAI-III
Versus
FORD INDIA LTD.
Final Order No. 509/2012 and Misc. Order No. 359/2012, dated 8-5-2012 in Application No. E/Misc/163/2011 in Appeal
No. E/689/2003
Cenvat/Modvat - Limitation for taking credit - Time-limit of six months in availing
the credit has been introduced with the sole objective of avoiding the evil of taking the
credit in respect of inputs which has been cleared by the input manufacturer more
than six months back - Said provision cannot be pressed into service to deny the
otherwise available substantive benefit of credit, to an assessee who had received the
goods within the period of six months from the date of clearance from the input
manufacturer’s factory and has duly made entries in RG-23A Part-I record - RG-23A
Part-II is only for the purpose of reflecting upon the quantum of credit taken, utilised
and balance of the same - RG-23A Part-II does not confer substantive right to the
assessee for availment of credit - Rule 57G of erstwhile Central Excise Rules, 1944.
[paras 10, 11, 12]
Cenvat/Modvat - Inputs received, entered in RG-23A Part-I and ultimately used
in the manufacture of final product, cleared on payment of duty - Though assessees
were entitled to avail the credit immediately and make entries in RG-23A Part-II
register for said purpose, entries could not be made on account of inadvertent
mistakes on the part of employees responsible for maintaining the records - HELD : A
manufacturer becomes entitled to take credit immediately on receipt of inputs without
any further formality - Amount of credit is to be simplicitor written in the records -
Inasmuch as RG-23A Part-I and Part-II required to be maintained in terms of sub-rule
(7) of Rule 57G of erstwhile Central Excise Rules, 1944 are two parts of the same
register, i.e., form RG-23A, entries in RG-23A Part-I itself would entitle an assessee to
avail the credit and entries in RG-23A Part-II is only for accountal purposes. [para 9]
Appeal rejected
CASES CITED
Banner Pharma Caps Pvt. Ltd. v. Commissioner — 2009 (246) E.L.T. 364 (Tribunal) — Relied on [Para 7]
Commissioner v. Aurobindo Pharma Ltd. — 2001 (127) E.L.T. 786 (Tribunal) — Relied on [Paras 1, 7]
Commissioner v. Crest Cables Ltd. — 2002 (50) RLT 704 (Tribunal) — Relied on......... [Paras 1, 7]
Final Order No. 1602/2009, dated 5-11-2009 by CESTAT — Referred................................. [Para 2]
Osram Surya Pvt. Ltd. v. Commissioner — 2002 (142) E.L.T. 5 (S.C.) — Inapplicable [Paras 2, 3, 4, 8]
Osram Surya Pvt. Ltd. v. Commissioner (22-10-99) — 1998 (29) RLT 684 (Tribunal) — Referred [Paras 3, 4, 8]

REPRESENTED BY : Shri V.V. Hariharan, JCDR, for the Appellant.

Shri Sri Prakash, Advocate, for the Respondent.

[Order per : Archana Wadhwa, Member (J)]. - The present appeal stands filed by the Revenue against the order
of Commissioner (Appeals) vide which, he has agreed with the respondents claim of MODVAT credit availed on the inputs
received by them during the period May-Sept. 1999, though credit was availed in March, 2000. For extending the benefit,
he has relied upon the Tribunal’s decision in the case of Commissioner of Central Excise, Hyderabad v. Aurobindo Pharma
Ltd. - 2001 (127) E.L.T. 786 as also on another decision of the Tribunal in the case of Commissioner of Central Excise v.
Crest Cables Limited - 2002 (50) RLT 704 (T).
2. It is seen that the Revenue’s appeal was earlier rejected by the Tribunal vide Final Order No. 1602/2009, dated
5-11-2009. However, the said order was recalled on a ROM application filed by the Revenue on the ground that Hon’ble
Supreme Court’s decision in the case of Osram Surya (P) Ltd. v. Commissioner of Central Excise - 2002 (142) E.L.T. 5

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(S.C.) was not considered. That is how the appeal stands listed before us for fresh disposal.
3. Learned JCDR Shri V.V. Hariharan appearing for the Revenue has drawn our attention to the Tribunal’s
decision in the case of Osram Surya (P) Ltd. v. Commissioner of Central Excise, Indore - 1998 (29) RLT 684 (CEGAT). By
drawing our attention to the facts of the case, he submits that the appellants in that case had received the inputs and made
entries in RG-23A Part-I in April, 1995, whereas the entries in RG-23A Part-II were taken in the month of Sept. 1995 i.e.,
beyond the period of six months from the date of issue of the invoices. Tribunal by taking note of the provisions of erstwhile
Rule 57G(2) held that no credit can be taken after a period of six months from the date of issuance of duty paying
documents. As such, the appeal was rejected. He submits that the said order of the Tribunal was confirmed by the Hon’ble
Supreme Court, as reported in 2002 (142) E.L.T. 5 (S.C.). As such, he submits that the issue stands covered by Hon’ble
Supreme Court and the present appeal of Revenue is required to be allowed.
4. Learned advocate Shri Sri Prakash appearing for the respondents submits that the law declared by the Hon’ble
Supreme Court in Osram Surya is not applicable to the facts of the instant case, inasmuch as, the issue before the Hon’ble
Supreme Court was different as is clear from the opening paragraph of the said judgment. He submits that the Hon’ble
Supreme Court was deciding a bunch of appeals involving an issue as to whether after the introduction of proviso to Rule
57G, a manufacturer can take the credit after six months from the date of issuance of duty paying documents specified in
the first proviso to Rule 57G of the Rules in respect of inputs received prior to the said date. The said issue was answered
by the Hon’ble Supreme Court against the assessee. He clarifies that the issue as to whether once the inputs has been
received and stands reflected in RG-23A Part I, within a period of six months, whether credit can be disallowed on the
ground that entry in RG-23A Part II was made subsequently, was not the subject matter of consideration before the Hon’ble
Supreme Court. He also draws our attention to the Tribunal’s order in the case of Osram Surya and submits that the facts
are not clear. Though the inputs were received by the assessee in that case in Apr.’95, there is no recording of fact as to
whether Apr.’95, itself was beyond the period of six months. Further, drawing our attention to the order portion of the
Tribunal’s decision, he submits that the Bench only considered Sept.’95 as the relevant date and inasmuch as the said date
was admittedly beyond the period of six months from the date of issuance of the invoices, credit was held as not
admissible.
5. Learned advocate also draws our attention to Rule 57AG, which stands introduced with effect from 1-4-2000,
enabling an assessee to take and utilise the earned or unutilised credit. He also submits that the said debarring provision
was subsequently withdrawn with effect from 1-4-2000, thus laying down no time-limit for taking the credit. As such, he
submits that the assessee would be entitled to take credit in respect of the very same inputs even subsequently i.e., after 1-
4-2000 and hypothetically speaking even today. He also draws our attention to the various decisions of the Tribunal holding
that taking of credit in RG-23A Part II relates to the receipt of inputs and entering the same in RG-23A Part I. As long as the
inputs are received under the cover of appropriate duty paying documents and are duly entered in RG-23A Part I within a
period of six months, credit cannot be denied on the sole ground that entry remains to be made in RG-23A Part II.
6. We have considered the submissions made by both the sides. As per the admitted facts on record, the inputs
were received by the respondents on various dates during the period May to Sept.’99. The said inputs were duly entered by
the respondents in their RG-23A Part I register. There is also no dispute about the fact that the said inputs were duly
covered by the invoices reflecting payment of duty in respect of the same. As such, the respondents were admittedly
entitled to the benefit of MODVAT credit in respect of the inputs so received by him, entered by him in RG-23A Part I and
ultimately used by him in the manufacture of the final product, cleared on payment of duty. As per the appellants, though
they were entitled to avail the credit immediately and make entries in RG-23A Part II register for the said purpose, the
entries could not be made on account of inadvertent mistake on the part of the employees responsible for maintaining the
records.
7. The question required to be decided in the present appeal is as to whether the above mistake committed by the
assessees in not reflecting the quantum of credit in RG-23A Part II register would disentitle them from the benefit of credit
of duty paid on the inputs, especially when the entries has been made in RG-23A Part I record and otherwise there is no
dispute about the entitlement of the credit to the assessees. We find that various decisions of the Tribunal answered the
above question in favour of the assessees. Reference may be made to the Tribunal’s decision in the case of Commissioner
of Central Excise, Hyderabad v. Aurobindo Pharma Ltd. - 2001 (127) E.L.T. 786 (Tri.-Che.) as also to Commissioner of
Central Excise v. Crest Cables Limited - 2002 (50) R.L.T. 704 (T). We also take note of another decision of the Tribunal in
the case of Banner Pharma Caps Pvt. Ltd. v. Commissioner of Central Excise, Vapi - 2009 (246) E.L.T. 364 (Tri.-Ahmd.). It
is seen that originally the learned Member (Technical) had disallowed the credit on the ground that though entries were
made in RG-23A Part I within a period of six months, entries were not made in RG-23A Part II within that period and as
such, the assessee was not entitled to the credit. Member (Judicial) wrote a separate order allowing the credit. On going
through the order proposed by Member (Judicial), Member (Technical) agreed with the same and credit was held to be
admissible.
8. At this stage, we take note of the Tribunal’s decision in the case of Osram Surya (P) Ltd., which according to
the Revenue, stands confirmed by the Hon’ble Supreme Court. On going through the Tribunal’s decision, we find that there
is no discussion on the issue i.e., when the entries stand made in RG-23A Part I within a period of six months, the
availment of credit after six months period is permissible or not. From para 4 of the said decision, we find that the only issue
decided was that the credit taken by the appellants in the month of Sept.’95 was beyond the period of six months and as
such, was held to be inadmissible in terms of proviso to Rule 57G(2). Otherwise also we find that there is nothing in the
said order to reflect upon the fact whether the entries in RG-23A Part I made in Apr.’95 were within the period of six months
or not. The Supreme Court’s decision confirming the decision of the Tribunal has also not reflected to the facts of each and
every case disposed of by the Hon’ble Apex Court. It is clear from the first paragraph of the Hon’ble Supreme Court’s
judgment that an issue different from the one which is the subject matter of the present appeal, was being considered by
them. As a bunch of appeals were being disposed of, the issue involved relates to availment of credit i.e., as to whether
after amendment to Rule 57G(2), the assessee can still take the credit of the inputs received prior to the said date. The said

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legal issue was answered in the negative by the Hon’ble Apex Court. As such, we find that the law declared by the
Apex Court is not applicable to the issue involved in the present appeal.
9. At this stage, we may refer to the provisions of Central Excise Rules relatable to the procedure prescribed for
availment of credit. Rule 57G(2) allowed a manufacturer, after filing a declaration, to take credit of duty paid on the inputs
received by him. Sub-rule (3) of Rule 57G is to the effect that no credit under sub-rule (2) was to be taken unless the inputs
are received in the factory under the cover of the documents mentioned therein. The cumulative effect of the reading of the
two sub-rules of Rule 57G make it clear that credit is available for taking in respect of inputs which stand received by an
assessee. As such, a manufacturer becomes entitled to take credit immediately on receipt of the inputs without any further
formality. The amount of credit is to be simplicitor written in the records. Further, the provisions of sub-rule (7) of Rule 57G
require a manufacturer to maintain an account in form RG- 23A, Part I and Part II. We note that the register required to be
maintained by an assessee is in Form RG-23A. The same further has two parts i.e., Part I and Part II. Admittedly, the
respondents have made entries of inputs in RG-23A Part I and in terms of sub-rule (2) of Rule 57G, had become entitled to
take the credit. Only the quantum of credit is required to be entered in RG-23A Part II. Inasmuch as, RG-23A Part I and
RG-23A Part II required to be maintained in terms of sub-rule (7) of Rule 57G are two parts of the same register i.e., Form
RG-23A, we are of the view that entries in RG-23A Part I itself would entitle an assessee to avail the credit and the entries
in RG-23A Part II is only for accountal purposes.
10. Our above view gets strengthened, when we look at the proforma of RG-23A Part I and RG-23A Part II. Title
to RG-23A Part I read as — “Stock account of inputs used in or in relation to the manufacture of the final products”. The
said proforma reflects upon the description of the inputs, quantity received, particulars of the documents under which the
inputs stands received and all other substantive requirements of the CENVAT Credit Rules. Title to RG-23A Part II is —
“Entry book of duty credit”. As such, it is clear that RG-23A Part-II is only for the purpose of reflecting upon the quantum of
credit taken, utilised and balance of the same. RG-23A Part II does not confer substantive right to the assessee for
availment of credit.
11. It may happen in a number of cases that the inputs might be received by the assessee but on account of loss
of documents or otherwise of some procedural objections, he is not able to take the credit. For removal of such objections
raised by the Revenue, it may take a period longer than six months. The credit will not become deniable to the assessee on
the said count, though the period of six months might have been passed by that time. At this stage, we also take note of the
proviso to sub-rule (10) of Rule 57G, which empowers the Assistant Commissioner to condone the delay in filing the
declaration. However, clause (i) of sub-rule 10 is to the effect that Assistant Commissioner will not condone the delay if the
inputs are received in the factory prior to the period of six months. This means that he can condone the delay in filing the
declaration in respect of the inputs received upto a period of six months back from the date of the condonation application.
Such condonation is likely to take some time in the hands of the officer and is likely to be sanctioned after a period of six
months, in which case, an assessee would be entitled to take the credit even after a period of six months. The reference to
all these provisions has been made by us to only show and reflect upon one fact that the time-limit of six months in availing
the credit has been introduced with the sole objective of avoiding the evil of taking the credit in respect of inputs which has
been cleared by the input manufacturer more than six months back. The said provision cannot be pressed into service to
deny the otherwise available substantive benefit of credit, to an assessee who had received the goods within the period of
six months from the date of clearance from the input manufacturer’s factory and has duly made entries in RG-23A Part-I
record.
12. We also find that ultimately the period of six months introduced in the said rule was withdrawn by the
legislature with effect from 1-4-2000. In view of the above, we do not find any merits in the Revenue’s appeal and reject the
appeal.
13. The miscellaneous application stands filed by the respondents is only for introduction of certain additional
issues. As we have already held in the favour and as such, we are not adverting to the same. The miscellaneous
application is disposed of accordingly.
(Dictated and pronounced in open court)
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