2004 (11) TMI 366 - AT - Central Excise

Summary

Issues:
1. Availment of Modvat credit on inputs under Rule 57A of the Central Excise Rules, 1944.
2. Allegation of clearance of goods clandestinely without payment of duty based on forged documents.
3. Show cause notice issued for recovery of Modvat credit availed by the appellant.
4. Challenge to the order of the Commissioner regarding recovery of Modvat credit.
5. Legal arguments regarding the payment of duty and the role of the Customs House Agent.
6. Admissibility of Modvat credit in the given circumstances.

Analysis:

1. The appellants, manufacturers of bulk drugs and intermediaries, availed Modvat credit on inputs under Rule 57A of the Central Excise Rules, 1944. They imported goods through Chennai Port in 1995 and availed Modvat credit on the countervailing duty paid by them. The details of credit availed were presented, totaling Rs. 13,23,542.

2. Investigations revealed that the Customs House Agent cleared the goods clandestinely without duty payment using forged documents, despite the appellants issuing a Demand Draft in favor of the Commissioner of Customs. A show cause notice was issued for recovery of the Modvat credit availed based on the forged bills of entry.

3. The Commissioner confirmed the demand for Rs. 13,23,542 under Rule 57-I(1) of the Central Excise Rules, 1944, along with interest. The appellant challenged this order, leading to the legal proceedings.

4. The appellant's advocate argued that the duty is deemed paid when the Demand Draft is deposited with Customs Authorities, citing relevant case law. It was contended that the appellant had sent the DD for the duty amount, which was credited to the Consolidated Fund of UOI before the fraud by the CHA. Proceedings against the appellant were dropped by the Commissioner in one instance, and in others, actions were pending against the CHA.

5. The Department argued that despite no liability to pay customs duty, the use of forged Bills of Entry rendered the Modvat credit inadmissible and subject to recovery.

6. The Tribunal found the issue covered by precedent, emphasizing that duty payment by DD should be deemed paid once credited to the Commissioner of Customs. The misuse of funds by the CHA did not justify recovery from the appellant, who acted in good faith. The appeal was allowed based on these considerations.