2010 (11) TMI 396 - AT - Central Excise

Demand with penalty - Cenvat credit - Rule 173 Q(1)(bb) of the Central Excise Rules, 1944 - Board s Circular No. B-22/67/86-TRU dated 9-12-1986 - the modvat credit amounting to Rs. 80,64,129/- of the Additional Customs duty paid on the goods imported under 11 bills of entry had taken - The only objection of the Department is that on the body of the bills of entry no declaration regarding appellant s intention to avail modvat credit had been made as per the provisions of the Board s circular dated 9-12-1986 - Held that there is no provision in the Central Excise Rules pertaining to modvat credit that for taking modvat credit in respect of the imported goods, the assessee has to make a declaration on the bills of entry regarding his intention to avail modvat credit - Decided in favour of the assessee

Summary

Issues:
1. Denial of modvat credit on the basis of declaration regarding intention to avail credit on bills of entry.
2. Imposition of penalty under Section 173Q(1)(bb) of the Central Excise Rules, 1944.

Analysis:
The appellants, engaged in the manufacture of Bulk Drugs/Drugs chargeable to central excise duty, availed Modvat credit under the Central Excise Act, 1944, for the period from May, 1994 to June, 1994. The dispute arose when the Department issued a show cause notice denying cenvat credit of Rs. 80,64,129/- taken on the basis of 11 Bills of Entry, alleging that no declaration regarding the appellant's intention to avail cenvat credit had been made on these Bills of Entry as per a specific Board's Circular. The show cause notice also proposed the imposition of a penalty under Section 173Q(1)(bb) of the Central Excise Rules, 1944. The Asstt. Commissioner initially dropped the proceedings, but the Commissioner reviewed the order and directed a review appeal, resulting in the confirmation of the modvat credit demand and the imposition of a penalty. The appellants challenged this decision through an appeal.

During the proceedings, the appellants argued that the Department's objection was solely based on the absence of a declaration on the bills of entry regarding the intention to avail modvat credit, as per the Board's Circular dated 9-12-1986. They contended that this instruction lacked legal authority as there were no provisions in the Central Excise Rules requiring such declarations for modvat credit. The Departmental Representative defended the impugned order, relying on the Commissioner (Appeals) findings, but acknowledged that the case was solely based on the Board's Circular without corresponding provisions in the Central Excise Rules regarding declarations on bills of entry for Modvat credit.

The Tribunal carefully considered the submissions and records. It noted that the modvat credit had been taken on goods imported under 11 bills of entry, without any dispute regarding ownership or declaration of inputs in the modvat declaration. The Department's objection solely rested on the absence of a declaration on the bills of entry, as per the Board's circular, which was found to lack legal basis. The Tribunal emphasized that there were no provisions in the Central Excise Rules mandating such declarations for modvat credit on imported goods. Consequently, the Tribunal deemed the Department's case as lacking legal authority, leading to the setting aside of the order denying modvat credit, recovery, and penalty imposition. The appeal was allowed, favoring the appellants.

In conclusion, the Tribunal's judgment revolved around the absence of legal provisions mandating declarations on bills of entry for availing modvat credit, ultimately leading to the decision in favor of the appellants and the setting aside of the Commissioner (Appeals) order.