M/S. SHREE HARI CHEMICALS EXPORT LTD. versus UNION OF INDIA AND ANR.

Citation: [2005] SUPP. 5 S.C.R. 900 · Decided: 16-12-2005 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
MIS. SHREE HARi CHEMICALS EXPORT LTD. 
v. 
UNION OF INDIA AND ANR. 
DECEMBER 16, 2005 
B 
[S.B. SINHA AND P.K. BALASUBRAMANYAN, JJ.] 
Central Excise Rules, 1944-Rules 56A and 57A-Modvat Credit 
Scheme-Availability of credit facility-Wrong daim of credit of duty on 
input of Naphthalene under Rule 57A-Subsequently claim made to return 
C the credit taken and claim raised under Rule 56A'--Entitlement of claim 
under Rule 56A-Held: Assessee cannot be denied relief on mentioning 
wrong provision of law, if he is otherwise entitled to-Credit available under 
Rule 57A having been returned, assessee can claim exemption under another 
Rule-However, matter remitted back to the concerned Authority to determine 
D whether assessee was ent,itled W lake credit under Rule 56A (8). 
In terms of the Notification of 1962; credit facility was available under 
Rule 56A of the Central Excls~ Riiles, 1944. However, by Notification of 1986 
issued under Rule 57 A credit facility was not available on inputs classifiable 
under Chapter Heading 'Ji7 of the Centrai Excise tariff Act Appella'nt-assessee 
E avai!ed the credit of duty t>ii Naphthalene falling under Chapter 27 in terms 
of Rule 5' A as an input for manufacturing of hydrochloric acid. Assistant 
Collector issued notice for disallowittg tlie cred!t as it was claimed wrongly. 
Appellant claimed cr~cm under Rule 56A and intended to return the credit 
taken under Rule 57 A. Assistant Commissioner disaiiuwed the claim but the 
F 
Commissioner altowed the ciaiin. Aggrieved respondent No. 2-Revenue filed 
an appeal. Tribunal ~llowed the same. High Court upheld the order. ~en<!e 
the pre~erti appMl. 
Allowing the appeal and remitting the matter to the Assistant 
Commissioner, the Court 
G 
HELD: 1.1. A wrong mentioning of a Section cannot be a ground to 
refuse relief to an assessee if he is otherwise entitled thereto. 1904-Fl 
1.2. Sub-rule (9) of Rule 56A of the Central Excise Rules, 1944 debars 
an assessee from taking benefit of one or the other sub-rules of Rules 56A 
if credit of duty paid on such material, component parts or finished product 
I-I 
900 
SHREE HARi CHEMICALS EXPORT LTD. v. U.O. I. [SINHA, J.] 901 
has been taken under Rule 57 A. Thus, the said provision merely debars A 
taking of credit both under Rules 56A and 57 A. Appellant although had taken 
credit as regard input of Naphthalene in terms of Rule 57 A, the same was 
not applicable in his case, as such he had no other option but to return the 
same. Therefore, the word 'taken' must be understood in its proper 
perspective. A person cannot take the benefit unless final order of assessment B 
is passed. Only because in his books of accounts entries are made for taking 
of the credit in terms of one provision of the Rules, the same if ultimately 
found to be inapplicable and return of the credit is taken effect, there cannot 
be any legal bar in claiming the exemption under another Rule. However, since 
it is not clear as to whether the appellant had complied with the provisions 
for taking credit in terms of Sub-rule (8) of Rule 56A of the Rules or not if C 
it was not otherwise entitled thereto, matter is remitted back to the Assistant 
Commissioner to determine the same. [905-C-F] 
Commissioner of Income-Tax, Madras v. Mahalakshmi Textile Mills Ltd 1 
66 ITR 710 and Anchor Pressings (P) Ltd. v. Commissioner of Income Tax, 
U.P. and Ors., (1986) 3 sec 439, referred to. 
D 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7534 of2005. 
From the Judgment and Order dated 14.9.2004 of the Bombay High 
Court in W.P. No. 8363 of2003. 
Prakash Shah, Jay Savla and Ms. Reena Bagga for the Appellant. 
E 
K. Swami and P. Panneswaran for the Respondents. 
The Judgment of the Court was delivered by 
S.B. SINHA, J. Leave granted. 
The Appellant herein inter alia is engaged in manufacture of 
Hydrochloric Acid. It falls under Chapter Heading 29 of the First Sched1,1le of 
the Central Excise Tariff Act, 1985. It uses Naphthalene for the m~nufacture 
of Hydrochloric Acid. 
F 
Chapter AA of the Central Excise Rules, 1944 (for short "the Rules") G 
provides for credit of duty paid on excisable goods used a~ inputs. (herein~fter 
referred to as "the Modvat Credit Scheme"). Sub-rule (1) of Rule 57 A which 
was applicable at the relevant time reads as under: 
"The provisions of this section shall apply to such finished excisable H 
A 
B 
c 
902 
SUPREME COURT REPORTS [2005) SUPP. 5 S.C.R. 
goods (hereinafter referred to as the "final· 

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