2008 (6) TMI 469 - AT - Customs

Summary

Issues involved: Alleged availment of Modvat credit in violation of Notification 203/92, applicability of Central Government Amnesty Scheme, interpretation of Supreme Court and Madras High Court judgments.

Summary:

Alleged violation of Modvat credit and Amnesty Scheme:
The case involved the import of goods under the Value Based Advance Licence Scheme, with the Revenue alleging the misdeclaration and improper availment of Modvat credit by the respondents. The Commissioner observed that the respondents had reversed the Modvat credit with interest for certain years before the closure of the Amnesty Scheme, but the differential amount demanded by the Department was reversed after the cut-off date of the scheme. The Revenue contended that the benefits of the Amnesty Scheme cannot be extended post-closure, citing a Supreme Court judgment. However, the respondents argued that their actions were in line with the Amnesty Scheme, referencing a Madras High Court judgment.

Interpretation of legal judgments:
The Revenue relied on the Supreme Court judgment in M/s. Bharti Telecom case, emphasizing that the Commissioner should not have extended the benefit of the Amnesty Scheme and should have taken penal action. On the other hand, the respondents cited the Madras High Court judgment in Shasun Drugs and Chemicals case to support their position that their actions were in accordance with the Amnesty Scheme. The Tribunal noted the differences in the facts of the cases and emphasized the need to strictly construe the provisions of the Amnesty Scheme without room for discretion.

Decision and remand:
The Tribunal held that the benefit of the Amnesty Scheme was not admissible to the respondents based on the Supreme Court judgment, and thus set aside the Commissioner's order. The matter was remanded back to the Commissioner for a fresh decision on various grounds including limitation, admissibility of Modvat credit, quantification of demand, and determination of penal liabilities, ensuring principles of natural justice were followed.

Conclusion:
The Tribunal's decision clarified the application of the Amnesty Scheme in the context of Modvat credit reversal, highlighting the importance of strict interpretation of legal provisions and adherence to judicial precedents in tax matters.