Vera Laboratories Ltd. vs Commissioner Of C. Ex. on 5 November, 2004

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Customs, Excise and Gold Tribunal - Bangalore

Vera Laboratories Ltd. vs Commissioner Of C. Ex. on 5 November, 2004

Equivalent citations: 2005(180)ELT242(TRI-BANG)

ORDER
 

T.K. Jayaraman, Member (T)

1. M/s. Vera Laboratories Ltd., Vijayanagar (hereinafter referred to as appellants) are the manufacturers of bulk drugs and intermediaries. They availed Modvat credit on the inputs under Rule 57A of the Central Excise Rules, 1944. They imported goods through Chennai Port during the year 1995, on payment of Customs duty and countervailing duty. As they are entitled for availing Modvat credit on the countervailing duty paid by them they availed the same. The details of credit availed are as follows :-

  S.No.  B/E NO. & DATE      CREDIT AVAILED         RG 23A P-II S.No.
                             TOWARDS MODVAT

Investigations conducted by the Special Intelligence and Investigation Branch (SUB) Air Cargo Complex Chennai revealed that the Customs House Agent M/s. Far Port International to whom the appellants entrusted the clearance of goods cleared the goods clandestinely without payment of duty on the strength of forged documents in spite of the facts that the appellant had issued a Demand Draft in the name of the Commissioner of Customs. The details of DDs as seen from the records are as follows :-

 4165/18-4-1995      001829/ Rs. 31,86,154/-          SBH, IF Branch,
                     6-4-1995                         Hyd
 5720/23-5-1995      589033/ Rs. 29,61,614/-          SBI
                     20-5-1995                        Hyderabad
 72430/12-12-1995    081008/ Rs. 9,36,678/-           ICICI Bank,
                     4-12-1995                        Hyd

2. As the goods were cleared clandestinely, a show cause notice dated 28-8-2000 was issued to the appellant by the Commissioner of Central Excise and Customs, Vizag for recovery of the Modvat credit availed by the appellant on the strength of the forged bills of entry. The adjudicating authority confirmed the demand of Rs. 13,23,542/- under the erstwhile Rule 57-1(1) of the Central Excise Rules, 1944 read with Section 11A of the Central Excise Act, 1944. Interest under Rule 57-1(5) was also demanded. The appellant has strongly challenged the order of the Commissioner.

3. Shri K.S. Ravishankar, the learned Advocate appeared on behalf of the appellant and Shri L. Narasimha Murthy, the learned SDR appeared for the Department.

4. The learned Advocate relying on the decision of this Tribunal in the case of Hetero Drug Ltd v. CC Airport Chennai [2004 (168) E.L.T. 211 (Tri. Bang)] urged that once the Demand Drafts drawn in favour of the Commissioner of Customs have been sent by the appellant, the duty in respect of the consignments is deemed to have been paid on the date the DD is deposited with the Customs Authorities. He also relied on the decision of the Larger Bench of the Tribunal in the case of CC, Jaipur v. Genus Overseas Electronics Ltd. [2003 (155) E.L.T. 541 (Tri-LB)], wherein it is held that the payment of duty by cheque would be the date of tender of the same and not realisation. Therefore, the date of tender of the DD would be the date of payment of the duty. In other words, as far as the payment is concerned, the appellant had already sent the DD for the appropriate amount of duty in favour of the Commissioner of Customs. The amount had also been credited and gone into the Consolidated Fund of UOI. Afterwards, fraud has been committed by the CHA and the amount has been misutilised for some other clearances. The goods have been cleared on the basis of forged documents. There is no evidence to show that the appellant had any role in the fraud committed by the CHA. It is also seen that in respect of the Bills of Entry, action is being taken by the Customs Authorities at Chennai. As regard the BE No. 72430 dated 12-12-1995, it was submitted that the Commissioner of Customs Air Cargo Complex, Chennai had already dropped the proceedings against the appellant and demanded duty from the CHA, M/s. Farport International who committed the fraud. In respect of other two BEs also, the proceedings are pending with the Commissioner of Customs Sea Customs, Chennai. Under these circumstances, it would also be very pre-mature on the part of the Commissioner of Central Excise to have demanded the Modvat credit availed.

5. The learned SDR argued that even if it is established that the appellant is not liable to pay any customs duty, it is a fact that the Bills of Entry are forged and no duty has been paid on the consignment when they were cleared. Under these circumstances, he felt that the availment of Modvat credit is not admissible and the same should be recovered.

6. On a careful consideration of the matter, we find that the issue is fully covered by Hetero Drugs case cited above. The fact of payment of duty by DD in the name of the Commissioner of Customs is not denied. It is the Customs House Agent who committed fraud on the Exchequer by misusing the money paid by the appellant. The moment the DD in the name of the Commissioner of Customs is credited, the duty should be deemed to have been paid by him. If the amount paid by the appellant had been used for the purposes other than for legitimate clearance of the goods of the appellant, connivance of the Departmental Officers could not be ruled out. Under these circumstances there is no justification in recovering the Modvat credit availed and utilised by the appellant in the year 1995 who was under the bonafide belief that the goods had been cleared legitimately. In the facts and circumstances of the case we allow the appeal.

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Customs, Excise and Gold Tribunal - Bangalore

Vera Laboratories Ltd. vs Commissioner Of C. Ex. on 5 November, 2004

Equivalent citations: 2005(180)ELT242(TRI-BANG)