Customs, Excise and Gold Tribunal - Bangalore
Visakhapatnam Steel Plant vs Cce on 29 November, 2004
Equivalent citations: 2005(119)ECR425(TRI.-BANGALORE)
ORDER S.L. Peeran, Member (J)
1. This appeal arises from Order-in-OriginaJ (Adjudication Order) No. 18/99-ASR dated 17.8.1999 by which the appellants have been denied benefit of Modvat credit in terms of Rule 57A on inputs. The appellants have been availing of the exemption under Notification No. 34/97-Cus. dated 7.4.1997 (Duty Entitlement Pass Book (DEPB) Scheme) in respect of imports and exports effected by them. The said notification exempts goods imported under the DEPB Scheme from the whole of the duty of Customs and the whole of the Additional Duty leviable under Section 3 of the Customs Act, 1975, when specifically claimed by the Importer subject, inter-alia, to the following conditions
(i) the Importer has been issued with a Duty Entitlement Pass by the Licensing Authority under the EXIM Policy;
(ii) the Importer has been permitted credit entries under the said DEPB at the notified rates;
(iii) the said DEPB to be produced before the Proper Officer of Customs for debit of duties leviable on the goods but for the exemption contained therein.
The Department Officials noticed that the appellants had availed of the amounts debited in their DEPB, representing the Additional Duty of Customs payable on the Inputs/Capital goods imported under Notification No. 34/97-Cus. dated 7.4.1997 as Modvat credit to the tune of Rs. 1,08,88,839/-. The Department's view is that the appellants are not eligible to avail Modvat credit. Accordingly they proceeded to issue a show cause notice dated 16.12.1998 and the same has been adjudicated in terms of the impugned order disallowing the Modvat credit and imposing penalty of 18 lakhs. Ld. Counsel fairly concedes that the issue has been decided against the party in terms of the Larger bench decision rendered in case of Essar Steel Ltd. v. Commissioner of Central Excise, Visakhapatnam . Further he submits that there were conflicting views of the Tribunal in the matter and therefore the penalty is required to be set aside in the present case. He relied on the Tribunal Judgment rendered in case of Duriappa Lime Products v. Commissioner of C. Ex., Mumbai which follows the M.P. High Court ruling rendered in case of S.N. Sunderson (Minerals) Ltd. v. Superintendent . wherein the Tribunal has set aside the penalty in the similar facts and circumstances of the case. He submitted that in view of the conflicting view of the Tribunal in the matter, the penalty is required to be set aside in the matter.
2. Learned SDR appearing for the Revenue submits that the penalty is leviable in the matter in view of the Minutes of the RAC Meeting which had clarified that they are not eligible for the benefit and hence, the penalty is required to be upheld in the matter.
3. In counter, the learned Counsel submits that the Minutes of the RAC Meeting is only an opinion and not a decision of any court and in the present matter, there were conflicting opinions.
4. On a careful consideration of the submissions made by both the sides, we find that the issue has already been decided against the party. The finding recorded in Para 1 to 9 of the judgment of the Larger Bench in case of Essar Steel Ltd. (supra) is reproduced below The issue referred to the larger Bench is whether mere debit in the DEPB Puss Book is sufficient for the eligibility of Modvat credit availed on the strength of Bills of Entry wherein the importers availed of the benefit of Notification 34/97-Cus. dated 7.4.1997 which exempts duties of customs (both basic plus additional) when the duty leviable on the goods is debited to the DEPB.
2. We have heard both sides. Under the DEPB Scheme credit is given to exporter in the Duly Entitlement Pass Book by the DGFT authorities when the goods are exported. Credit obtained by an exporter can be used to discharge import duty liability on the goods imported. The scheme is basically a brain child of Commerce Ministry. In order to facilitate importers availing of the Scheme, the Govt. of India. Ministry of Finance issued Notification No. 34/97-Cus. which exempts duties of customs leviable on imported goods provided such duties are debited to credit available in the pass book for want of requisite balance the importer is required to discharge balance duty by cash payment. During the relevant period Para 7.41 of the EXIM Policy prescribed that the additional customs duty paid in cash on inputs cleared under DEPB Scheme can be adjusted as Modvat credit.
3. Appellants have taken credit of CVD debited in the Pass Book. It is the contention of the Department that Modvat credit is not admissible when CVD is paid by way of debit in the Pass Book for the reason that the asscssec/appellant availed the benefit of Notification 34/97-Cus. whereby it was exempted from payment of duty of customs.
4. Before us the appellants contend that the issue is covered in their favour by the decision of the Tribunal in Polylhose India Pvt. Ltd. v. CCE, Chennai , wherein the Single Member Bench took the view that Modvat credit can be taken of the CVD paid by debit in the pass book. This decision was later followed by the Division Bench in SPIC Ltd. v. CCE, Chennai 2004 (61) RLT 671. On the other hand, the learned DR pleaded that Bills of Entry clearly show that the importer availed of the benefit of Notification 34/97-Cus-that the argument that it makes no difference whether such duty is paid by way of debit in the pass book or by cash for the purpose of availmcnt of Modvat credit is repugnant to Modvat scheme particularly when the Import Policy itself prescribes in Para 7.41 that only cash payment towards CVD can be taken as Modvat credit. He submitted that the decisions relied upon by the learned Counsel have not considered that the importer availed of the benefit of Notification 34/97-Cus., and therefore, these decisions are distinguishable and cannot be relied upon to support the appellants' stand.
5. We have carefully considered the rival submissions. Modvat scheme is a special scheme where an assessee can avail of the duty paid on inputs as Modvat under certain conditions. One such condition is that duty should have been paid on the inputs. In the present case, no such duty has been paid by availing of the benefit of Notification 34/97. In the case relied upon by the learned Counsel for the appellant the Tribunal observed that the Department was standing on technicalities when it does not allow Modvat credit of duty paid by way of debit in the pass book while allowing credit of duty paid in cash. We, however, are unable to bring ourselves to agree with the above. Our reasons are recorded herein below:
6. Notification 34/97-Cus. exempts goods from payment of duty when the amount representing such duties is debited in the pass book. Thus a person who has not availed the benefit of the Notification and pays duties alone can take Modvat credit. When the importer pays duties of customs in part by cash, he is not availing the benefit of the said Notification to that extent. That is why Para 7.41 of the Exim Policy stipulates that Modvat credit is taken to that extent, that is, to the extent to which duties are discharged by cash payment. In the Polyhose India Pvt. Ltd. and Spic Ltd. cases, the Tribunal did not discuss the purport of the Notification No. 34/97 and merely observed that under Rule 57G of the Central Excise rules, an assessee can avail of Modat credit on the strength of Bill of Entry. While it is true that the appellants availed of the credit on the strength of such a document, the document itself indicate that no CVD was paid and therefore, Modvat credit cannot be taken on the strength of such a document. In this view of the matter the finding of the Tribunal in the case of Grasim Industries Ltd. v. CCE, Bangalore 2002 (149) ELT 764 that relevant date of document eligible for credit of duty would be the date of payment of CVD in cash is required to be accepted.
7. We, therefore, answer the reference by holding that mere debit in the pass book is not sufficient for the eligibility of Modvat credit.
8. We now proceed to dispose of the appeal itself with the consent of both sides.
9. In the light of the answer to the reference we uphold the impugned order to the extent that it disallows Modvat credit of Rs. 19,89,464/- taken by the appellants herein during the period from 23.6.1998 to 4.8.1998 against demand made in the DEPB Book. However, having regard to the totality of the facts and circumstances of the case, we reduce the penalty to Rs. 2 lakhs. The appeal is thus, partly allowed.
Therefore, the issue on merits has settled against the appellants. Insofar as the levy of penalty in the matter is concerned, we notice that there were several judgments in favour of the appellants. Therefore the matter was referred to the Larger Bench for a final decision. The appellants held bona fide belief that they were eligible for the benefit of the exemption Notification. In view of the conflicting views of the Tribunal, levy of penalty is not justified as held in the case of Duriappa Lime Products v. Commissioner of C. Ex., Madurai (supra), therefore, the penalty levied in the matter is set aside. The appeal is, thus, partly allowed.
(Pronounced and dictated in the open Court).