2014 (7) TMI 945 - HC - Central Excise

Cenvat Credit - Whether the Modvat Credit can be taken on the inputs which were not suffered duty? - import of goods - allegation that CHA has committed fraud upon revenue - department argues that there is no credit of the customs duty - Held that - The order in original does not indicate that the subject demand drafts have been credited to any other partys account. It is not in dispute that the amounts were credited to the Consolidated Fund of Union of India in which event it is not permissible for the Department to argue that no such amounts have been credited to the account of the Department. In that view of the matter the finding of the Tribunal with respect to the payment of customs duty against the Bills of Entries Nos.4165 and 72430 is unexceptionable. Once the amount of customs duty having been paid is accepted the entitlement of Modvat Credit cannot be denied. - Decided in favor of assessee.

Summary

Issues:
- Whether Modvat Credit can be taken on inputs not suffered duty?
- Whether the Tribunal's finding on the payment of customs duty against specific Bills of Entries is correct?
- Whether the case should be remitted back to the Tribunal for further consideration on specific grounds raised by the respondent?

Analysis:
1. Modvat Credit Eligibility:
The appellant, Commissioner of Central Excise and Customs, contended that Modvat Credit cannot be availed without proof that the imported goods suffered duty. The Tribunal reviewed the case involving three Bills of Entries and found that the respondent had imported raw materials by paying customs duty. A show cause notice was issued alleging wrongful Modvat Credit availment. The Tribunal, citing Hetero Drug Ltd. v. CC Airport, Chennai, allowed the appeal, stating that the duty amounts were credited to the Department's account. The High Court upheld the Tribunal's decision for two Bills of Entries but remitted the case for further review on the third.

2. Payment of Customs Duty:
For Bills of Entries 4165 and 72430, the High Court found evidence that the duty amounts were specifically credited to the Commissioner of Customs account of the respondent. It dismissed the appellant's argument regarding fraudulent acts by the Customs House Agent and confirmed that the duty amounts were credited to the Consolidated Fund of the Union of India. As the duty payment was established, the entitlement to Modvat Credit was upheld for these Bills of Entries.

3. Remittance for Further Consideration:
Regarding Bill of Entry 5720, the High Court noted that although the respondent provided evidence of duty payment, the Tribunal did not make a specific finding on this matter. Therefore, the case was remitted back to the Tribunal for a detailed review based on the respondent's submissions. The High Court also allowed the respondent to raise legal and factual grounds, including the issue of limitation, before the Tribunal for a comprehensive assessment.

In conclusion, the High Court partly allowed the appeal, upholding the Tribunal's decision on two Bills of Entries while remitting the case back for further consideration on the third entry. No costs were awarded in this matter.