1989 (4) TMI 225 - AT - Central Excise

Summary

Issues:
Application for dispensing with pre-deposit of irregularly availed MODVAT credit.

Analysis:
The judgment pertains to an application seeking dispensation with the pre-deposit of irregularly availed MODVAT credit. The appellants had imported component parts and claimed MODVAT credit on the countervailing duty paid on these inputs. However, a Show Cause Notice was issued questioning the credit availed, contending that the inputs were exempted from excise duty, and therefore, the countervailing duty should not have been paid. The Assistant Collector confirmed the reversal of credit, and the Collector (Appeals) held that the recovery of credit utilized was time-barred and disallowed the credit. The appellants argued that the countervailing duty was validly paid as per the Customs Tariff Act, and the exemption under the Central Excise Tariff Act should not automatically apply to imported goods.

In the analysis, it was highlighted that Rule 57-A permits the availment of MODVAT credit on countervailing duty paid on inputs used in manufacturing finished products. It was undisputed that the imported inputs were assessed with additional duty of Customs, not granted any exemption, and were notified for MODVAT purposes. The Bills of Entry showing duty payment were available and duly declared. The Tribunal emphasized that the countervailing duty paid was in the nature of Customs Duty under the Customs Tariff Act, and the exemption under the Central Excise Tariff Act should not automatically apply to imported goods. Referring to a Supreme Court decision, it was clarified that the additional duty under the Customs Tariff Act is akin to Customs Duty. Therefore, the Tribunal set aside the impugned order and allowed the appeal, acknowledging the validity of the countervailing duty paid on the imported inputs.

This judgment clarifies the applicability of MODVAT credit on countervailing duty paid on imported inputs and emphasizes that the exemption under the Central Excise Tariff Act does not automatically apply to imported goods. It underscores the distinction between Customs Duty and excise duty exemptions, citing legal precedents to support the decision to allow the appeal and uphold the validity of the countervailing duty paid by the appellants.