2006 (11) TMI 42 - AT - Central Excise

Cenvat/Modvat of CVD CVD was not paid in cash on imported inputs on account of exemption and debited through DEPB scrip Modvat credit of CVD of such imports not retrospective in operation- Credit not allowed

Summary

Issues:
1. Retrospective operation of Notification No. 96/2004-Cus.
2. Entitlement of Modvat credit of CVD on imported goods.
3. Interpretation of Notification provisions for retrospective effect.

Analysis:
The appeal before the Appellate Tribunal CESTAT, CHENNAI pertains to the retrospective operation of Notification No. 96/2004-Cus. dated 17-9-2004 regarding the Modvat credit of CVD on goods imported by the respondents. The key issue is whether the respondents were entitled to claim Modvat credit of CVD on inputs imported by them, where the CVD was not paid in cash due to an exemption under Notification No. 45/2002-Cus. The Department sought to deny the Modvat credit as there was no cash payment of CVD on the inputs. The original authority upheld this proposal, which was later disapproved by the Commissioner (Appeals), leading to the present appeal by the Revenue.

The Tribunal noted that the Department's stance was supported by a previous decision of the Tribunal's Larger Bench in Essar Steel Ltd. v. CCE, Vishakhapatnam. However, the Commissioner (Appeals) held that Notification No. 96/2004-Cus. allowed Modvat credit of CVD on such imports retrospectively, making the respondents eligible for the benefit. Upon examining the Notification, the Tribunal observed that it was in effect until March 31, 2005, and did not intend to have a retrospective effect. Citing legal precedent, including a Supreme Court judgment in Commissioner of Income-Tax v. Varas International Private Ltd, the Tribunal emphasized that for an amendment to be retrospective, it must be explicitly stated or implied in the provision itself.

Based on the legal principles and the Notification's provisions, which did not indicate retrospective operation, the Tribunal set aside the impugned order. Consequently, the respondents were deemed ineligible for the benefit of the Notification and could not claim Modvat credit of CVD on the relevant inputs. As a result, the appeal of the Department was allowed by the Tribunal, leading to the decision in favor of the Revenue. The order was duly dictated and pronounced in open Court, concluding the matter before the Appellate Tribunal CESTAT, CHENNAI.