2010 (4) TMI 778 - HC - Central Excise

Clandestine removal - Rule 3(1) and Rule 7 of CENVAT Credit Rules, 2002 and Rule 57AE(3) of the Central Excise Rules, 1944 - Circular No. F.No. 345/2/2000-TRU, dated 28-8-2000, has clarified that in a situation where inputs are received in a factory prior to supersession of the Central Excise Rules, however, credit has not been availed of for any reason, such credit earned, can be availed in terms of the transitional provisions under the subsequent rules - Tribunal further noticed that in Show Cause Notice F.No. VIII/10-83/COMMR/2001, dated 24-7-2001 in the customs proceedings, the Department had agreed to the fact that due records had been maintained by the respondent - There was no evidence that the clearance of goods was with the intention to evade payment of duty - Merely because there was non-compliance with some directions issued by the Settlement Commission, it would not affect the rights of the respondents to avail of the benefit of the CENVAT credit - Appeal is dismissed

Summary

Issues Involved:
1. Whether the Tribunal's judgment absolving the respondent from fraudulent clearance under Rule 3(1) of CENVAT Credit Rules, 2002 and Rule 57AE(3) of the Central Excise Rules, 1944 is correct.
2. Whether the benefit of credit can be granted if the conditions under Rule 3(1) of CENVAT Credit Rules, 2002 and Rule 57AE(3) of the Central Excise Rules, 1944 are not fulfilled.
3. Whether the Tribunal was correct in concluding that goods cleared before filing of bills of entry and obtaining out of charge would not attract the provisions of Rule 7 of CENVAT Credit Rules, 2002 and Rule 57AE(3) of the Central Excise Rules, 1944.

Issue-wise Detailed Analysis:

1. Tribunal's Judgment on Fraudulent Clearance:
The Tribunal's judgment absolving the respondent from fraudulent clearance was challenged. The respondent company had imported iron ore pellets and cleared them without waiting for an out of charge order in fourteen out of fifteen bills of entry. The customs authorities discovered this, and a show cause notice was issued demanding customs duty, interest, and proposing confiscation. The respondents approached the Settlement Commission, which settled the customs duty and granted immunity from fine, penalty, and prosecution. The Tribunal found no evidence of fraudulent intent, noting that the Settlement Commission did not record any findings of fraud, willful misstatement, or intent to evade duty. The Tribunal concluded that the mere filing of a petition before the Settlement Commission could not be considered a tacit admission of guilt.

2. Benefit of Credit on Technical Grounds:
The Tribunal addressed whether the benefit of credit could be granted despite non-fulfillment of conditions under Rule 3(1) of CENVAT Credit Rules, 2002 and Rule 57AE(3) of the Central Excise Rules, 1944. The adjudicating authority had disallowed the CENVAT credit, citing improper records and non-payment of CVD for some bills of entry. The Tribunal observed that the respondents had paid the entire duty and used the inputs in the manufacture of the final product cleared on payment of duty. It held that the respondents' right to avail of CENVAT credit was substantive and could not be denied on hyper-technical grounds. The Tribunal also noted that the Settlement Commission had not imposed any penalty for the alleged offense of clearance without filing bills of entry.

3. Goods Cleared Before Filing Bills of Entry:
The Tribunal examined whether the clearance of goods before filing bills of entry and obtaining out of charge would attract the provisions of Rule 7 of CENVAT Credit Rules, 2002 and Rule 57AE(3) of the Central Excise Rules, 1944. The Tribunal found that the respondents' efforts to file bills of entry were made ineffective by the customs authorities, necessitating their approach to the Settlement Commission. The Tribunal concluded that the respondents could not be penalized for this and that the credit availed on the basis of TR-6 challans was valid. It also noted that there was no maximum time limit prescribed for availing credit under the amended Modvat Rules or the subsequent CENVAT Credit Rules.

Conclusion:
The Tribunal's conclusions were based on findings of fact and appreciation of evidence on record. It held that the denial of credit by the adjudicating authority was not substantiated by evidence and was against the facts recorded in another show cause notice. The Tribunal's decision was upheld, and the appeals were dismissed, with no substantial question of law arising from the Tribunal's order.