2003 (11) TMI 216 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility of Modvat credit after six months from the date of payment of duty on imported goods.
2. Interpretation of the "date of issue" for the Bill of Entry.
3. Applicability of penalty for wrongfully availed Modvat credit.

Detailed Analysis:

1. Eligibility of Modvat Credit:
The primary issue in this appeal is whether Modvat credit can be availed after six months from the date of payment of duty on imported goods. The appellants argued that the date of issue of the document for imported goods should be when the goods are released from customs and received in the factory, not the date of the Bill of Entry. They relied on several precedents, including Bullows Paint Equipment Pvt. Ltd. v. CCE, Mumbai VI, which stated that the date of filing the Bill of Entry is irrelevant to the physical movement of goods. The Tribunal previously allowed Modvat credit for one Bill of Entry, but the Department contended that sub-rule (5) of Rule 57G explicitly restricts credit after six months from the date of issue of any document specified in sub-rule (3), including the Bill of Entry.

2. Interpretation of the "Date of Issue":
The appellants argued that the "date of issue" for a Bill of Entry should be the date when the goods are cleared from customs and received in the factory. They cited cases like Hamco Mining & Smelting Co. Ltd. v. C.C.E. & C., Surat, which held that the date of issue cannot be earlier than when the importer can reasonably expect the goods to come into their hands. However, the Department maintained that the six-month period should be computed from the date of payment of duty, as clarified by the Central Board of Excise and Customs Circular No. 275/109/96-CX. The Tribunal agreed with the Department, emphasizing that the Bill of Entry is a specified document under sub-rule (3) and the six-month restriction applies.

3. Applicability of Penalty:
The appellants contended that no penalty should be imposed as they had complied with the law and there was no mens rea. They cited the Supreme Court's decision in Osram Surya (P) Ltd. v. CCE, Indore, where the penalty was set aside. The Department countered that the appellants took Modvat credit wrongly, violating Rule 173Q (1) (bb) of the Central Excise Rules, 1944, which mandates a penalty for such actions. The Tribunal noted that the appellants took credit in January 1999, well after the six-month restriction was in force since 1995, and thus imposed a penalty, albeit reduced to Rs. One lakh.

Conclusion:
The Tribunal concluded that the appellants were not eligible to take Modvat credit beyond the six-month period from the date of payment of duty or the date of issue of gate passes. The interpretation of the "date of issue" for the Bill of Entry was upheld as the date of payment of duty. Additionally, the appellants were found liable for a penalty due to the wrongful availing of Modvat credit, with the penalty amount reduced to Rs. One lakh. The appeal was disposed of accordingly.