2015 (6) TMI 76 - HC - Central Excise

Denial of MODVAT Credit - Non compliance with Rule 57G of the Central Excise Rules, 1944 - Held that - There is no breach of the Central Excise Act nor there is any breach of Central Excise Rules, 1944. Modvat credit claimed by the respondent upon certain inputs. It is not in dispute that those inputs have been brought into the factory of the respondent. It is also not in dispute that these inputs have also been utilised for manufacturing process. If these two facts have established, looking to the order in original, then it appears that there is substantial compliance of the Rules, 1944 - respondent who has claimed Modvat credit. Thus, the apprehension on the part of this appellant that double benefit may not go to the parties is uncalled for and unwarranted for the very same goods. The importer cannot claim refund of the countervailing duty as well as the manufacturer cannot get Modvat credit. This is principally true but here in the facts of the present case there is no allegation levelled by the Excise Department in their show-cause notice. Twice the benefits have been claimed, one by the importer (refund of the countervailing duty) and another by the manufacturer-respondent (Modvat credit upon the inputs). It is the case of the appellant that if one benefit is availed another is not allowed. In the facts of the present case only the manufacturer who is the respondent has claimed the Modvat credit. Even department of Central Excise is not knowing whether importer has claimed any refund of countervailing duty. It appears that the department is in search of declaration to be given by the importer, but, the fact remains that the importer has not claimed even the refund of countervailing duty. Thus, in the facts of the present case out of two persons namely importer and the manufacturer, only manufacturer is claiming Modvat credit. - Decided against Revenue.

Summary

Issues:
1. Compliance with Rule 57G of the Central Excise Rules, 1944 for availing Modvat credit.
2. Allegation of double benefit being claimed by the importer and the manufacturer.
3. Interpretation of Rule 57G and circular issued by the Government of India regarding importer's declaration.

Comprehensive Analysis:

Issue 1: Compliance with Rule 57G of the Central Excise Rules, 1944 for availing Modvat credit
The appellant argued that the respondent did not comply with Rule 57G, which requires a declaration by the importer stating they will not claim a refund of countervailing duty to prevent misuse. The appellant contended that the respondent wrongly availed Modvat credit as the importer did not provide such a declaration. However, the court found that there was substantial compliance with the rules as the inputs were brought into the factory and used in the manufacturing process. The court noted that the appellant failed to prove any breach of the Central Excise Act or Rules, 1944, and dismissed the argument of non-compliance with Rule 57G.

Issue 2: Allegation of double benefit being claimed by the importer and the manufacturer
The appellant raised concerns about the possibility of double benefits being claimed by both the importer and the manufacturer. However, the court observed that there was no evidence of the original importer availing a refund of countervailing duty or attempting to do so. The court emphasized that in this case, only the manufacturer (respondent) claimed Modvat credit, and there was no indication of the importer seeking a refund of countervailing duty. Therefore, the court concluded that the apprehension of double benefits was unfounded as only the manufacturer had availed the Modvat credit.

Issue 3: Interpretation of Rule 57G and circular issued by the Government of India regarding importer's declaration
The court examined Rule 57G of the Central Excise Rules, 1944 and a circular issued by the Government of India, which mentioned the requirement of a declaration by the importer. While the circular indicated the need for such a declaration, the court noted that in the present case, the importer did not claim a refund of countervailing duty. As only the manufacturer sought Modvat credit, the court found no reason to interfere with the decision of the CESTAT, which had properly appreciated this aspect of the matter. The court highlighted that the circular did not apply in this scenario where only the manufacturer claimed the credit.

In conclusion, the Tax Appeal was dismissed by the High Court as there was no violation of the Central Excise Act or Rules, and the respondent had validly availed the Modvat credit without any double benefits being claimed.