Government of IndiaMinistry of Finance Budget 97-98




Excise Notification

No. 6/97 Central Excise(N.T)
Part 2

57I.   Recovery  of credit wrongly availed of or utilised  in  an
irregular manner.-  (1) (i)  Where credit of duty paid on  inputs
has  been  taken  on  account  of  an  error,  omission  or  mis-
construction, on the part of an officer or a manufacturer, or  an
assessee, the proper officer may, within six months from the date
of filing the return as required to be submitted in terms of sub-
rule  (8)  of rule 57G, and where no such return as aforesaid  is
filed,  within six months from the last date on which such return
is  to  be  filed  under  the  said rule,  serve  notice  on  the
manufacturer or the assessee who has taken such credit  requiring
him to show cause why he should not be disallowed such credit and
where  the  credit  has  already been utilised,  why  the  amount
equivalent to such credit should not be recovered from him.

(ii)  Where  a  manufacturer has taken the credit  by  reason  of
fraud,  wilful mis-statement, collusion, or suppression of facts,
or contravention of any of the provisions of the Act or the rules
made  thereunder  with  intent to  evade  payment  of  duty,  the
provisions  of clause (i) shall have effect as if for  the  words
`six months', the words `five years' were substituted.

(iii)  The  proper officer, after considering the representation,
if  any, made by the manufacturer or the assessee on whom  notice
is  served under clause (i), shall determine the amount  of  such
credit  to  be  disallowed (not being in  excess  of  the  amount
specified   in   the  show  cause  notice)  and  thereupon   such
manufacturer or assessee shall pay the amount equivalent  to  the
credit disallowed, if the credit has been utilised, or shall  not
utilise the credit thus disallowed.

Explanation.-  Where the service of the notice is  stayed  by  an
order  of  a  court  of law, the period of  such  stay  shall  be
excluded  from  computing the aforesaid period of six  months  or
five years, as the case may be.

(2)  If any inputs in respect of which credit has been taken  are
not fully accounted for as having been disposed off in the manner
specified in this section, the manufacturer shall, upon a written
demand  being  made  by  the Assistant  Commissioner  of  Central
Excise, pay the duty leviable on such inputs within three  months
from the date of receipt of the notice of demand.
    
(3)  Where a manufacturer or an assessee fails to pay the  amount
determined under sub-rule (1) or sub-rule (2) within three months
from  the  date  of receipt of demand notice, he  shall  pay,  in
addition  to the amount so determined, interest at such rate,  as
may  be  fixed, by the Central Board of Excise and Customs  under
section  11AA  of  the Act, from the date immediately  after  the
expiry  of  the  said period of three months  till  the  date  of
payment.
  
(4)  Where  the  credit  of duty paid on inputs  has  been  taken
wrongly  by  reason of fraud, wilful mis-statement, collusion  or
suppression  of facts, or contravention of any of the  provisions
of  the  Act  or the rules made thereunder with intent  to  evade
payment  of  duty,  the person who is liable to  pay  the  amount
equivalent  to the credit disallowed as determined  under  clause
(iii) of sub-rule (1) shall also be liable to pay a penalty equal
to the credit so disallowed.
     
  Explanation I. - Where the credit disallowed is reduced by  the
Commissioner of Central Excise (Appeals), the Appellate  Tribunal
or,  as  the  case may be, a court of law, the penalty  shall  be
payable on such reduced amount of credit  disallowed.
   
Explanation  II.-  Where the credit disallowed  is  increased  or
further   increased  by  the  Commissioner  of   Central   Excise
(Appeals), the Appellate Tribunal or, as the case may be, a court
of law, the penalty shall be payable on such increased or further
increased, amount of credit  disallowed.
   
(5)  Notwithstanding anything contained in clause (iii)  of  sub-
rule (1) or sub-rule (4), where the credit of duty paid on inputs
has been taken wrongly on account of fraud, wilful mis-statement,
collusion, or suppression of facts, or contravention  of  any  of
the  provisions  of  the Act or the rules  made  thereunder  with
intent to evade payment of duty, the person who is liable to  pay
the  amount  equivalent to the credit disallowed,  as  determined
under sub-rule (2), shall also be liable to pay interest at  such
rate  as may be fixed by the Board under section 11AA of the  Act
from the first day of the month succeeding the month in which the
credit  was  wrongly  taken, till the date  of  payment  of  such
amount.
  
Explanation I. - For the removal of doubts, it is hereby declared
that  the  provisions of this sub-rule shall not apply  to  cases
where the credit disallowed became payable before the 23rd day of
July, 1996.
  
Explanation  II.- Where the credit disallowed is reduced  by  the
commissioner of central Excise (Appeals), the Appellate  Tribunal
or,  as  the case may be, a court of law, the interest  shall  be
payable on such reduced amount of credit disallowed.
   
Explanation  III.- Where the credit disallowed is  increased,  or
further   increased,  by  the  Commissioner  of  Central   Excise
(Appeals), the Appellate Tribunal or, as the case may be, a court
of  law,  the  interest shall be payable on  such  increased,  or
further increased, amount of credit disallowed.
   
57J.  Credit of duty in respect of inputs used in an intermediate
product. - (1) Notwithstanding anything contained in these rules,
the manufacturer shall be allowed to take credit of the specified
duty  paid  on inputs described in column (2) of the Table  below
and used in the manufacture of intermediate products described in
column  (3)  of the said Table received by the said  manufacturer
for  use  in or in relation to the manufacture of final  products
described  in the corresponding entry in column (4) of  the  said
Table:
                                
                              TABLE
                                                     
S.No. Description of      Description of      Description of
         inputs       intermediate products  final products
(1)         (2)                 (3)                (4)
    
1     All       goods  All   goods   falling All        goods
      falling  within  within  the  Schedule falling   within
      the Schedule to  to the Central Excise the Schedule  to
      the     Central  Tariff  Act, 1985  (5 the      Central
      Excise   Tariff  of  1986), other than Excise    Tariff
      Act, 1985 (5 of  the following namely:-Act, 1985 (5  of
      1986),other                            1986),     other
      than        the                        than         the
      following                              following,
      namely:-                               namely:-
      (i)       goods  (i)             goods (i)        goods
      classifiable     classifiable    under classifiable
      under       any  any    heading     of under        any
      heading      of  Chapter  24  of   the heading       of
      Chapter  24  of  Schedule to the  said Chapter  24   of
      the Schedule to  Act;                  the Schedule  to
      the said Act;                          the said Act;
      (ii)      goods  (ii)            goods (ii)       goods
      classifiable     classifiable    under classifiable
      under   heading  heading Nos.36.05  or under    heading
      Nos.  36.05  or  37.06 of the Schedule Nos.36.05     or
      37.06  of   the  to the said Act;      37.06   of   the
      Schedule to the                        Schedule to  the
      said Act;        (iii)           goods said Act;
      (iii)     goods  classifiable    under (iii)    fabrics
      classifiable     sub-heading      Nos. of   cotton   or
      under      sub-  2710.11,     2710.12, man-made  fibres
      heading    Nos.  2710.13   or  2710.19 falling   within
      2710.11,         (except       Natural Chapter      52,
      2710.12,         gasoline  liquid)  of Chapter  54   or
      2710.13      or  the  Schedule to  the Chapter  55   of
      2710.19 (except  said Act;             the Schedule  to
      Natural                                the said Act;
      gasoline                               
      liquid) of  the  (iv)    high    speed (iv) fabrics  of
      Schedule to the  diesel            oil cotton  or  man-
      said Act;        classifiable    under made      fibres
      (iv) high speed  heading  No.27.10  of falling   within
      diesel      oil  the  Schedule to  the heading
      classifiable     said Act.             Nos.58.01,
      under   heading                        58.02,     58.06
      No.27.10 of the                        (other      than
      Schedule to the                        goods    falling
      said Act.                              within      sub-
                                             heading
                                             No.5806.20),
                                             60.01  or  60.02
                                             (other      than
                                             goods    falling
                                             within      sub-
                                             heading
                                             No.6002.10)   of
                                             the Schedule  to
                                             the Act.
     
(2)  The  manufacturer of final products shall take credit  under
sub-rule  (1)  only if the intermediate products are manufactured
in  a  factory  as a job work in respect of which  the  exemption
contained in the notification of the Government of India  in  the
Ministry  of  Finance (Department of Revenue) No.  214/86-Central
Excises, dated the 25th March,1986, has been availed of.

(3) The credit under sub-rule (1) shall be allowed only if the
intermediate products received by the manufacturer of the said
final products are accompanied by any of the documents as
specified under rule 57G evidencing the payment of duty on such
inputs.";

(b)  for  section AAAA, the following section shall  be
substituted, namely:-

  "AAAA.  CREDIT  OF  DUTY  PAID ON CAPITAL  GOODS  USED  BY  THE
MANUFACTURER OF SPECIFIED GOODS
                                
57Q.  Applicability. - (1) The provisions of this  section  shall
apply  to goods (hereafter in this section,  referred to  as  the
"final  products")  described in column (3) of  the  Table  given
below  and to the goods (hereafter, in this section, referred  to
as  "capital  goods"),  described in the corresponding  entry  in
column  (2)  of  the  said Table, used  in  the  factory  of  the
manufacturer of final products.

                          TABLE
-----------------------------------------------------------------

S.No.    Description of capital goods        Description of
      falling within the Schedule to the     final products
      Central Excise Tariff Act, 1985 (5
       of 1986) and used in the factory
              of the manufacturer


(1)                   (2)                         (3)
-----------------------------------------------------------------

1.    All  goods  falling under  heading  All  goods specified
      Nos. 82.02 to 82.11;                in  the Schedule  to
                                          the  Central  Excise
                                          Tariff Act, 1985  (5
                                          of    1986),   other
                                          than  the following,
                                          namely:-
2.    All goods falling under chapter 84  (i)     all    goods
      (other  than  internal  combustion  falling        under
      engines falling under heading  No.  Chapter 24; and
      84.07 or 84.08 and of a kind  used  (ii)    all    goods
      in   motor  vehicles,  compressors  falling        under
      falling  under heading  No.  84.14  heading  Nos.  36.05
      and    of    a   kind   used    in  or 37.06.
      refrigerating  and airconditioning
      appliances and machinery,  heading
      or  sub-heading Nos. 84.15, 85.18,

3.    8422.10,  84.24, 84.29  to  84.37,
      84.40,  84.50,  84.52,  84.69   to
      84.73,   84.76,  84.78,  expansion

4.    valves and solenoid valves falling
      under sub-heading No. 8481.10 of a
      kind  used  for refrigerating  and
      airconditioning   appliances   and
      machinery);
      All goods falling under chapter 85
      (other  than  those falling  under
      heading Nos. 85.09 to 85.13, 85.16
      to 85.31, 85.39 and 85.40);
      All  goods  falling under  heading
      No.  90.11 to 90.13, 90.16, 90.17,
      90.22   (other  than  for  medical
      use), 90.24
      to  90.31 and 90.32 (other than of  
      a  kind used for refrigeration and

5.    airconditioning   appliances   and
      machinery);

6.    Components, spares and accessories

7.    of  the  goods  specified  against

8.    S.Nos. 1 to 4 above;

9.    Moulds and dies;

10.   Refractories    and     refractory
      materials;

11.   Tubes   and  pipes  and   fittings

12.   thereof, used in the factory;
      Pollution control equipment;
      Grinding wheels and the like goods
      falling   under  sub-heading   No.
      6801.10;
      Goods  falling under  heading  No.
      68.02; and
      Lubricating oils, greases, cutting
      oils and coolants.

(2)(i)  The  manufacturer of the final products shall be  allowed
credit  of  the  duty of excise or the additional  duty  leviable
under  section  3  of the Customs Tariff Act, 1975  (5  of  1975)
(hereinafter referred to as "specified duty") paid on the capital
goods.
(ii) The manufacturer availing of the credit may utilise the same
for  payment  of  duty of excise payable on  the  final  products
manufactured in his factory.
(3)   Notwithstanding  anything  contained  in  sub-rule  (1),the
manufacturer  of  the final products shall be allowed  credit  of
additional  duty leviable under section 3 of the  Customs  Tariff
Act,  1975  (5  of  1975) on goods falling under Chapter  heading
No.98.01 of the first schedule to the said Customs Tariff Act, to
the  extent  of   75% of the said additional duty  paid  on  such
goods.
(4)  A  manufacturer  of the final products   purchasing  capital
goods   from  a  unit situated in a Free Trade  Zone  or  from  a
hundred  per cent. export-oriented undertaking or from a unit  in
an  Electronic  Hardware Technology Park or  Software  Technology
Parks and using them  in the manufacture of final products, shall
be  allowed to take the credit of the specified duty paid on such
capital  goods only to the extent of duty which is equal  to  the
additional  duty leviable on like goods under section  3  of  the
Customs  Tariff Act, 1975 (5 of 1975), equivalent to the duty  of
excise paid on such capital goods.
(5) The credit of the specified duty on capital goods (other than
those  capital  goods  in respect of which  credit  of  duty  was
allowable under any other rule or notification prior to  the  1st
day  of  March, 1997) shall not be allowed if such capital  goods
were received in the factory before the 1st day of March, 1997.
(6) A manufacturer shall be allowed credit of specified duty paid
on capital goods manufactured by him for the manufacture of final
products in his factory.
(7)   The  credit of  the specified duty on capital goods  [other
than those capital goods covered under S.No. 5, 7, 10, 11 and  12
of  column  (2) of the Table below sub-rule (1)] and received  in
the  factory on or after the 1st day of January, 1996, shall  not
be  taken on a date prior to the date on which such capital goods
are  installed  or, as the case may be, used for  manufacture  of
excisable  goods, in the factory of the manufacturer as certified
by  such  manufacturer or a person designated  by  him  for  this
purpose.
(8)   Notwithstanding  anything  contained  in  sub-rule  (7),  a
manufacturer  intending  to remove the  capital  goods  from  his
factory for home consumption or for export, prior to their  being
installed or used, as the case may be, shall be allowed  to  take
credit on the date on which such capital goods are so removed  by
him from his factory on payment of the appropriate duty of excise
leviable thereon as provided in rule 57S.

57  R.  Credit of duty not to be allowed or denied or  varied  in
certain circumstances and adjustment in duty credit. -
  (1) No credit of the specified duty shall be allowed on capital
goods  which are used in the manufacture of final products (other
than  final products which are exempt from the whole of the  duty
of excise leviable thereon under any notification where exemption
is granted based upon the value or quantity of clearances made in
a  financial year)  on which no amount of excise duty is  payable
for any reason except when the final product is either,
     
(i) cleared to a unit in a Free Trade Zone; or
     
  (ii)  cleared  to  a  hundred  per  cent.  export-oriented
undertaking;  or

(iii)  cleared to a unit  in  an       Electronic
Hardware Technology Park or Software Technology Parks;

(2)  Credit  of  the  specified duty allowed in  respect  of  any
capital  goods shall not be denied or varied on the  ground  that
any  intermediate  products have come into existence  during  the
course  of  manufacture  of  the  final  product  and  that  such
intermediate  products are, for the time being, exempt  from  the
whole  of  the duty of excise  leviable thereon or chargeable  to
nil rate of duty:
Provided  that such intermediate products are specified as  final
products  in column (3) of the Table below sub-rule (1)  of  rule
57Q.

(3)  The  credit of the specified duty paid on the capital  goods
shall  be  allowed  to a manufacturer if the  capital  goods  are
acquired  by the manufacturer on lease, higher purchase  or  loan
agreement,  from  a financing company subject  to  the  following
procedure, namely:-

(i)   The  manufacturer  shall  file  a  declaration  before  the
Assistant Commissioner of Central Excise  as required  under rule
57T;

(ii)   The   manufacturer availing credit of the specified   duty
paid  on   capital  goods,  who has  entered  into  a   financial
arrangement,-

      (a)  for financing the cost of such capital goods excluding
the specified duty, shall produce a copy of  the invoice referred
to in rule 57T, evidencing payment of specified duty along with a
copy  of  the     agreement entered into by  him  with  the  said
financing company; or

      (b)  for financing the cost of such capital goods including
the  specified  duty,   shall produce a    certificate  from  the
financing company to the effect that the duty specified  on  such
capital  goods has   been paid by the said manufacturer  to  such
financing  company,  prior  to  payment  of  first  lease  rental
instalment  or first hire-purchase instalment or first instalment
of re-payment of loan, as the case may  be,  along with a copy of
the agreement entered into with the said financing company.

(iii)  The manufacturer and the financing company shall not claim
depreciation under the Income-tax laws on that part of the  value
of  capital  goods which represents the amount of specified  duty
paid on such capital goods.

(iv)  The  relevant   documents  required  for  the  purpose   of
availing credit of the specified duty paid on such capital  goods
under  rule   57T  shall bear the name of the manufacturer  along
with that of the financing company.

(4)  If a manufacturer of final products has taken credit on  any
capital  goods and subsequently it so happens that any refund  of
the duty paid by the manufacturer of capital goods or importer of
capital  goods,  as the case may be, is allowed to  him  for  any
reason,  then the user manufacturer shall accordingly adjust  the
amount of credit in his credit account and if such adjustment  is
not  possible for any reason, the user manufacturer shall pay the
amount  in  cash  equal to the amount of refund  allowed  to  the
manufacturer  or,  as  the case may be, to  importer  of  capital
goods.

 (5) If a user manufacturer has taken credit on any capital goods
and subsequently it so happens that any additional amount of duty
is  recovered  from  the manufacturer of such  capital  goods  or
importer of such capital goods, as the case may be, then the user
manufacturer shall be allowed an additional credit equal  to  the
amount of such additional amount recovered.

(6) The provisions of sub-rule (5) shall not apply in cases where
the duty on capital goods has been short levied or short paid  or
has  been  erroneously refunded by reason of fraud, collusion  or
any wilful mis-statement or suppression of facts or contravention
of  any  provisions of the Act or the rules made thereunder  with
the intent to evade payment of duty.

(7)  (i)  The  additional credit as per  sub-rule  (5)  shall  be
allowed  by  the  proper officer on the basis  of  a  certificate
issued   by   the   Superintendent  of  Central   Excise   having
jurisdiction  over the factory, or as the case  may  be,  by  the
proper officer in the customs area, from where such capital goods
were originally cleared.

(ii) The said certificate shall indicate full description of  the
capital  goods,  original  duty  paid  and  particulars  of   the
documents  under  which the capital goods were cleared  from  the
factory  or, as the case may be, from the customs area  and  also
the  differential  duty recovered from the  manufacturer  or  the
importer.

(8)  No  credit  of the specified duty paid on the capital  goods
shall  be allowed, if the manufacturer, claims depreciation under
section  32  of  the Income-tax Act, 1961 (43  of  1961),  or  as
revenue expenditure under any other provisions of the said Income-
tax  Act,  in respect of that part of the value of capital  goods
which  represents  the amount of specified duty on  such  capital
goods.

57  S.  Manner of utilisation of the capital goods and the credit
allowed in respect of duty paid thereon. -  (1) The capital goods
in  respect  of which credit of specified duty has  been  allowed
under rule 57Q may be -

(i)   used  in  the  factory  of the manufacturer  of  the  final
products; or

(ii)  removed,  after  intimating the Assistant  Commissioner  of
Central  Excise, having jurisdiction over the factory  and  after
obtaining   dated acknowledgement of the same, from  the  factory
for  home  consumption or for export, on payment  of  appropriate
duty  of excise leviable thereon or for export under bond, as  if
such capital goods have been manufactured in the said factory.

(2) In a case, -

     (a)  where capital goods are removed without being used from
     the  factory for home consumption, on payment of   duty,  or
     for export on payment of duty of excise, such duty of excise
     shall in no case be less than the amount  of credit that has
     been  allowed in respect of such  capital goods  under  rule
     57Q;

     (b) where capital goods are removed after  being used in the
     factory for home consumption on payment of duty of excise or
     for  export under rebate on payment of duty of excise,  such
     duty of excise shall be calculated by allowing deduction  of
     2.5 per cent. of credit taken for each quarter of a year  of
     use  or  fraction thereof, from the date of availing  credit
     under rule 57Q; and

     (c)  where  capital goods are sold as waste and  scrap,  the
     manufacturer shall pay the duty leviable on such  waste  and
     scrap.

(3)  Credit  of  the  specified duty allowed in  respect  of  any
capital goods may be utilised towards payment of duty of excise,-

      (i)   on  any  of  the final products manufactured  in  the
factory  of the manufacturer; or

      (ii)  on  the  waste,  if any, arising  in  the  course  of
manufacture of the final products; or

      (iii) on the capital goods themselves if such capital goods
are removed under sub-rule (1).

(4) No part of the credit of duty allowed, shall be utilised save
as  provided in sub-rule (3) or, shall be refunded in cash or  by
cheque.

(5)  On  an  application  made by a  manufacturer  of  the  final
products,  the  Commissioner may, subject to such conditions  and
limitations as he may impose, permit a manufacturer having credit
in  his  account in Form R.G.23-C maintained under rule  57T  and
lying unutilised, on account of shifting of the factory belonging
to the manufacturer, to another site, or on account of  change in
ownership,  or  change  in the site of a factory  resulting  from
sale,  merger, amalgamation or transfer to a joint venture   with
the  specific provision for transfer of liabilities  of  the  old
factory,  to transfer such unutilised credit to such transferred,
sold, merged or amalgamated factory.

(6)  Transfer  of unutilised credit under sub-rule (5)  shall  be
allowed  only  if the stock of inputs as such or in  process,  if
any,   is also transferred along with the factory to the new site
or  ownership and that the stock of such inputs is duly accounted
for to the satisfaction of  the Commissioner.

(7)  Notwithstanding  anything  contained  in  sub-rule  (1),   a
manufacturer may, after intimating the Assistant Commissioner  of
Central Excise having jurisdiction over the factory and obtaining
dated acknowledgement of the same, remove the capital goods to  a
place  for test, repairs or re-conditioning of such capital goods
and  return  the same to his factory, after the said purpose  has
been  carried  out,  for  further use as such  capital  goods  by
following the procedure as may be specified  by the Central Board
of Excise and Customs or the Commissioner.

(8)  Notwithstanding  anything  contained  in  sub-rule  (1),   a
manufacturer  may,  with the permission of the  Commissioner  and
subject to such terms and conditions and  limitations as  he  may
impose, remove the moulds and dies, without payment of duty, to a
job-worker  for the purpose of production of goods on his  behalf
and according to his specifications.

(9)  The  Commissioner shall not permit a manufacturer to  remove
the  moulds  and dies under sub-rule (8) unless the  manufacturer
undertakes to bring back the said moulds and dies and  the  goods
so  manufactured, within a period of three months from  the  date
of  their removal or such extended period as the Commissioner may
permit.

(10)  In  case where moulds and  dies removed under sub-rule  (8)
are  not  received back within a period of three months from  the
date  of  removal of such moulds and dies or within such extended
period  as  the  Commissioner  may permit,  duty  shall  be  paid
equivalent to the credit taken on the said moulds and dies.

57T.   Procedure to be observed by the manufacturer. - (1)  Every
manufacturer  intending to take credit of the duty  paid  on  the
capital goods under rule 57Q shall, before receipt of the capital
goods,  file  a  declaration with the Assistant  Commissioner  of
Central  Excise having jurisdiction over his factory,  indicating
therein the particulars of the capital goods,  description of the
final  products  manufactured in his  factory  and  such  further
information as the Assistant Commissioner may  require, and shall
obtain a dated acknowledgement of the said declaration.

(2)  The manufacturer shall also file a declaration in accordance
with the provisions of sub-rule ( 3) of rule 57R to the Assistant
Commissioner  of  Central  Excise having  jurisdiction  over  his
factory  to the effect that such capital goods shall not be  used
exclusively  for  production of a final product which  is  exempt
from  the  whole  of the duty of  excise leviable thereon  (other
than  a final product which is exempt  from the whole of the duty
of excise leviable thereon under any notification where exemption
is granted based upon the value or quantity of clearances made in
a  financial year) or is chargeable  to nil rate of duty and also
that  he shall  not claim  depreciation under section 32  of  the
Income-tax  Act,  1961  (43 of 1961), or as  revenue  expenditure
under any other provision of  the said Income-tax Act, in respect
of  that part of the value of capital goods which represents  the
amount of specified duty paid on such capital goods.

(3)  In case where a manufacturer was not in a  position to  make
the  declaration  under  sub-rule (1) and makes  the  declaration
subsequently but ordinarily within a period of one  month  or  in
exceptional cases, within a further  period not exceeding, in any
case,  more  than another two months from the date of receipt  of
the said capital goods in the factory, the Assistant Commissioner
of  Central Excise may, on sufficient cause being shown  to  him,
allow the filing of the declaration.

(4)  A manufacturer intending to take credit of the duty paid  on
the  capital  goods under rule 57Q shall intimate the particulars
regarding full description of the capital goods along with  brand
name and identification marks or numbers if any,  particulars  of
documents  evidencing payment of duty on such capital goods,  and
any  other  particulars as the Commissioner may require,  to  the
jurisdictional Superintendent of Central Excise, as soon  as  may
be, on receipt of such capital goods.

(5) In case where a manufacturer has already installed or started
using  capital goods without filing the intimation under sub-rule
(4),  the  Assistant  Commissioner of  Central  Excise  may,   on
sufficient  cause  being   shown  by  the  manufacturer  for  not
intimating  the  receipt  of  the  capital  goods  to  the   said
Superintendent, allow the intimation of receipt of  such  capital
goods to be filed for the purpose of sub-rule (4).

(6)  The  manufacturer shall be allowed to  take  the  credit  of
specified  duty  only if the capital goods are  received  in  the
factory  premises  of  the manufacturer  under  the  cover  of  a
document specified  under rule 57G evidencing the payment of duty
on such capital goods.

(7)  The  Assistant Commissioner may, on sufficient  cause  being
shown  to  him,  allow the manufacturer to  take  credit  of  the
specified  duty  on  capital goods, paid by a contractor  or  job
worker  who undertakes the job of initial setting up, renovation,
modernisation  or  expansion  of  the  plant  on  behalf  of  the
manufacturer  of  final products, subject to such  procedure  and
conditions  as  may  be  specified  by the  Commissioner  or  the
Central Board of Excise and Customs.

(8)  If the Assistant Commissioner of Central Excise is satisfied
that  the duplicate copy of the invoice has been lost in transit,
he  may  allow a manufacturer of final products, to  take  credit
under  sub-rule  (6)  on the basis of the original  copy  of  the
invoice.

(9)  A  manufacturer  of  the final products  shall  maintain  an
account in Parts I and II of Form R.G.-23C.

(10)   A  manufacturer of the final products shall,  within  five
days  after the close of each month, submit to the Superintendent
of  Central  Excise a return indicating the  particulars  of  the
capital goods received during the month and the amount of  credit
taken along with the original duty paying  documents and extracts
of  Parts I and II of Form R.G. - 23C, and the Superintendent  of
Central  Excise  shall after verifying their genuineness,  deface
such documents and return the same to the manufacturer.

(11)  Notwithstanding  anything contained in  sub-rule  (1),  the
Commissioner may, having regard to the nature, variety and extent
of production or manufacture or frequency of removals-

(i)  fix  in  relation to any assessee or class  of  assessees  a
period  shorter than one month for filing the return as  required
to be filed under sub-rule (10) ; or

  (ii) permit that the return may be filed by the assessee within
a  period not exceeding twenty one days after the close  of  each
month.

(12)   In  the  case of a manufacturer availing of any  exemption
based  upon  the value or quantity of clearances in  a  financial
year,  the provisions of sub-rule (10) shall have effect in  that
financial  year  as  if  for  the  expression  "month"  occurring
therein, the expression "quarter" were substituted.

57U.   Recovery of credit wrongly availed of or utilised  in   an
irregular manner. - (1) Where  credit of the specified duty  paid
on  capital goods under rule 57Q has been taken on account of  an
error, omission or mis-construction, on the part of an officer or
a  manufacturer, or an assessee, the proper officer  may,  within
six  months  from the date of filing the return  required  to  be
submitted  in terms of sub-rule (10) of rule 57T, and  where   no
such  return  as aforesaid is filed, within six months  from  the
last  date  on  which such return is to be filed under  the  said
rules,  serve notice on the manufacturer or the assessee who  has
taken   such credit   requiring him to show cause why  he  should
not be disallowed to such credit and where the credit has already
been  utilised, why the amount equivalent to such  credit  should
not be recovered from him.

(2)  Where the credit under rule 57Q has been taken by reason  of
fraud,  wilful mis-statement, collusion or suppression of  facts,
or contravention of any of the provisions of the Act or the rules
made  thereunder  with  intent to  evade  payment  of  duty,  the
provisions of sub-rule (1) shall have effect as if for the  words
`six  months'  occurring therein,  the words  `five  years'  were
substituted.

Explanation.  - Where the service of the notice is stayed  by  an
order  of  a  court  of law, the period of  such  stay  shall  be
excluded  from  computing the aforesaid period of six  months  or
five years, as the case may be.

(3)   The   proper   officer   shall,   after   considering   the
representation, if any, made by the manufacturer or the  assessee
on whom notice is served under sub-rule (1), determine the amount
of the credit to be disallowed (not being in excess of the amount
specified   in   the  show  cause  notice)  and  thereupon   such
manufacturer or assessee shall pay the amount equivalent  to  the
credit disallowed, if the credit has been utilised, or shall  not
utilise the credit thus disallowed.

(4)  If  any  capital goods in respect of which credit  has  been
taken are not fully accounted for as having been disposed off  in
the  manner  specified in this section, the  manufacturer  shall,
upon a written demand being made by the Assistant Commissioner of
Central  Excise,  pay  the duty leviable on  such  capital  goods
within three months of the receipt of the notice of demand.

(5)  Where a manufacturer or an assessee fails to pay the  amount
determined under sub-rule (3) or under sub-rule (4), as the  case
may be, within three months from the date of receipt of notice of
demand,  he  shall pay, in addition to the amount so  determined,
interest at such rate as may be fixed by the Board under  section
11AA  of  the Act, from the date immediately after the expiry  of
the said period of three months till the date of payment.

(6) Where the credit of duty paid on capital goods has been taken
wrongly  by  reason of fraud, wilful misstatement,  collusion  or
suppression of facts or contravention of any of the provisions of
the  Act  or  the  rules made thereunder, with  intent  to  evade
payment  of  duty,  the person who is liable to  pay  the  amount
equivalent to the credit disallowed as determined under  sub-rule
(3) shall also be liable to pay a penalty equal to the credit  so
disallowed.
  
(7)   (i)  Where  the  credit  disallowed  is  reduced   by   the
Commissioner of Central Excise (Appeals), the Appellate  Tribunal
or  a  court  of  law, the penalty under sub-rule  (6)  shall  be
payable on such reduced amount of credit  disallowed.
  
(ii)   Where  the  credit  disallowed  is  increased  or  further
increased  by  the Commissioner of Central Excise (Appeals),  the
Appellate  Tribunal or, as the case may be, a court of  law,  the
penalty  shall be payable on such increased or further increased,
amount of credit  disallowed.
   
(8)  Notwithstanding anything contained in sub-rule (3)  or  sub-
rule (5), where the credit of duty paid on capital goods has been
taken   wrongly   on  account  of  fraud,  wilful  mis-statement,
collusion or suppression of facts or contravention of any of  the
provisions of the Act or the rules made thereunder with intent to
evade payment of duty, the person who is liable to pay the amount
equivalent to the credit disallowed, as determined under sub-rule
(3), shall also be liable to pay interest at such rate as may  be
fixed  by the Board under section 11AA of the Act from the  first
day  of  the  month succeeding the month in which the credit  was
wrongly taken, till the date of payment of such amount.
    
Explanation . - For the removal of doubts, it is hereby  declared
that  the  provisions of this sub-rule shall not apply  to  cases
where the credit disallowed became payable before the 23rd day of
July, 1996.
    
(9) Where the credit disallowed is reduced by the Commissioner of
Central  Excise (Appeals), the Appellate Tribunal or a  court  of
law,  the  interest under sub-rule (8) shall be payable  on  such
reduced amount of credit disallowed.
   
(10)  Where  the  credit  disallowed  is  increased,  or  further
increased,  by the Commissioner of Central Excise (Appeals),  the
Appellate Tribunal or a court of law, the interest under sub-rule
(8)  shall  be  payable on such increased, or further  increased,
amount of credit disallowed.".


                                       (NAVNEET GOEL)
                       UNDER SECRETARY TO THE GOVERNMENT OF INDIA




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