2004 (10) TMI 374 - AT - Central Excise

Summary

Issues:
1. Availment of Modvat credit on the strength of Bills of Entry.
2. Admissibility of Modvat credit when CVD is paid by debit in the pass book.
3. Interpretation of relevant provisions and past judgments regarding Modvat credit eligibility.
4. Impact of Notification No. 34/97 on the availment of Modvat credit.

Analysis:

1. The issue in this case revolves around the availment of Modvat credit based on Bills of Entry. The appellant utilized credit obtained from the DGFT authorities to pay CVD on imported goods. The scheme allows exporters to receive credit in the duty entitlement pass book for exporting goods, which can be used to discharge import duty liabilities. The appellant claimed Modvat credit for CVD debited in the pass book, triggering a dispute with the department.

2. The appellant contended that Modvat credit can be taken for CVD paid through pass book debit, citing precedents like Polyhose India Pvt. Ltd. and SPIC Ltd. The department argued against this, emphasizing that Modvat credit eligibility is linked to cash payment as specified in the Import Policy. The department highlighted the impact of Notification No. 34/97, which exempted the appellant from customs duty payment.

3. The legal debate focused on the interpretation of Modvat credit rules and past judgments. The Tribunal analyzed the Modvat scheme's essence, emphasizing that duty payment on inputs is a prerequisite for credit availment. The Tribunal referenced Para 7.41 of the Import Policy, clarifying that only cash payment towards CVD qualifies for Modvat credit, not debit entries in the pass book.

4. The impact of Notification No. 34/97 on Modvat credit eligibility was crucial. The Tribunal differentiated between individuals availing the notification's benefit and those paying duties independently. The decision aligned with a Larger Bench ruling (Order No. 945/04), which established that Modvat credit cannot be claimed for CVD debited in the pass book. Consequently, the Tribunal upheld the Commissioner's order, denying the appellant's appeal based on the legal principles and precedents discussed.