2011 (1) TMI 684 - AT - Central Excise

Notification No. 203/92 in respect of raw materials imported by them under DEEC scheme during the period 1992-96. - Reversal of credit - the appellants by their conduct has been able to establish that they chose to follow the option provided by the Commissioner under Public Notice No. 3/97 dated 28-1-1997 - As per Board Circular No. 318/97-C.E., dated 26-6-1997, it has been clarified that in the case where the credit is reversed on actual basis, such certificate should be issued only after verification of the records of the exporter by a cost accountant nominated under Section 14A of the Central Excise Act, 1944 As the board has clarified vide circular dated 26-6-1997 that the reversal on actual basis be considered and on a certificate issued by the cost accountant appointed by the Chief Commissioner under Section 14A of the Central Excise Act, 1944 and the appellants has opted for the same, the issue pending challenging the formula before the Hon ble High Court does not come into the picture of sanctioning the refund claim of the appellants - Decided in favor of the assessee by way of remand to adjudicating authority

Issues:
1. Interpretation of Customs Notification No. 203/92 regarding availing of benefits under DEEC scheme.
2. Application of Amnesty Scheme for exporters not complying with condition-V of the Notification.
3. Quantification of Modvat credit reversal and the formula provided by Circulars.
4. Discrepancy between Cost Accountant reports and rejection by the Department.
5. Refund claim rejection based on pending writ petition challenging formula.
6. Compliance with Circulars for reversal of credit on actual basis.

Issue 1: Interpretation of Customs Notification No. 203/92
The appellants availed benefits under Customs Notification No. 203/92 for raw materials imported under DEEC scheme. Condition-V of the Notification required no input stage credit to be taken on export goods to avail exemption on imported raw materials. The dispute arose when the appellants availed Modvat credit on inputs used in export goods, leading to a duty demand by the Revenue.

Issue 2: Application of Amnesty Scheme
The Government introduced an Amnesty Scheme for exporters not complying with condition-V, requiring reversal of Modvat credit and interest payment by a specified date to avoid penalties. The appellants followed this scheme and quantified the credit reversal based on Circulars and Public Notices issued by the Government.

Issue 3: Quantification of Modvat credit reversal
Circulars provided a formula for quantifying Modvat credit reversal, with subsequent alternatives due to exporter difficulties. The Cost Accountant's role was crucial in verifying the reversal, and the appellants followed the option of reversing credit on an actual basis as per Public Notices.

Issue 4: Discrepancy in Cost Accountant reports
The Cost Accountant appointed by the Chief Commissioner conducted a special audit, but the Department rejected the report as based on assumptions. The rejection led to a refund claim denial, pending a writ petition challenging the formula.

Issue 5: Refund claim rejection
The Department rejected the refund claim, citing the pending writ petition and discrepancies in the Cost Accountant reports. The appellate Commissioner upheld the rejection, linking it to the unresolved legal challenge.

Issue 6: Compliance with Circulars for reversal of credit on actual basis
The Tribunal found that the appellants followed the Circulars and Public Notices allowing reversal on an actual basis, supported by the appointment of a Cost Accountant. The rejection of the Cost Accountant's report without sharing it with the appellants violated principles of natural justice.

In conclusion, the Tribunal set aside the rejection of the refund claim, directing the Department to provide the Cost Accountant's report to the appellants and reconsider the claim within a specified timeline, emphasizing compliance with Circulars and fair procedural practices.

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