2005 (7) TMI 553 - AT - Central Excise

Summary

Issues:
1. Validity of Modvat credit taken beyond the period of six months.
2. Applicability of Rule 57E for taking Modvat credit.
3. Imposition of penalty for availing Modvat credit.

Issue 1 - Validity of Modvat credit taken beyond the period of six months:
The case involved an appeal against an order passed by the Commissioner of Central Excise regarding the validity of Modvat credit taken beyond the six-month period. The appellants imported woven fibre glass bags under Project Import and later sought reassessment due to unforeseen circumstances. The reassessment was done on 8-3-99, and the differential duty was paid on 15-3-99. The appellants argued that the date of payment of duty should be reckoned from 8-3-99, not the original date of filing the Bill of Entry (BE). They relied on circulars and case laws to support their claim that the limitation of six months for taking credit should be computed from the date of payment of duty. The Tribunal agreed with the appellants, stating that the BE itself is a valid duty paying document, and there was no need for a separate certificate under Rule 57E. Therefore, the appellants were entitled to the full Modvat credit, and the appeal was allowed.

Issue 2 - Applicability of Rule 57E for taking Modvat credit:
The appellants argued that Rule 57E was not applicable in their case as they were the importers of the goods and had paid the additional duty component due to the reclassification of the goods at their request. They contended that Rule 57E applies when there are separate entities for the supply and receipt of inputs, which was not the situation in their case. The Tribunal agreed with this argument, stating that Rule 57E would only apply when additional duty is paid as a continuation of earlier duty, not as a result of complete reassessment due to a change in classification. Therefore, Rule 57E was deemed not to be attracted in this scenario.

Issue 3 - Imposition of penalty for availing Modvat credit:
The appellants also challenged the imposition of a penalty for availing the Modvat credit, arguing that the credit availed was correct and proper, hence no penalty was justified. The Tribunal did not find any justification for imposing a penalty, given that the Modvat credit was deemed valid and proper. Consequently, the appeal was allowed with consequential relief, and the penalty was not upheld.

In conclusion, the Tribunal ruled in favor of the appellants, allowing the appeal and granting them the full Modvat credit without the need for a separate certificate under Rule 57E. The penalty for availing the credit was also not upheld, considering the correctness and validity of the credit availed by the appellants.