1992 (10) TMI 167 - AT - Central Excise

Summary

Issues:
Appeal against rejection of MODVAT benefit for imported Nickel Squares due to payment of countervailing duty at a later stage.

Analysis:
The appeal was against the rejection of MODVAT benefit for imported Nickel Squares by the Collector of Central Excise (Appeals), Pune. The appellants manufactured cast alloy permanent magnets and imported Nickel Squares for production. They availed MODVAT benefit for one consignment but not for another where the countervailing duty was charged at nil rate initially. A demand was later made by the Customs House, which the appellants paid to avail MODVAT credit. The Assistant Collector objected to this claiming MODVAT credit cannot be taken for inputs received without initial duty payment. The Collector (Appeals) upheld this view, leading to the present appeal.

The Tribunal found that the appellants paid the demanded duty for the Nickel Squares despite it being time-barred, as MODVAT credit was admissible under Rule 57E of the Central Excise Rules. The Tribunal disagreed with the Assistant Collector's view that MODVAT benefit can be denied for inputs received without initial duty payment. The purpose of the MODVAT scheme is to prevent cascading effect of duty on inputs, so even if duty is paid subsequently, it should be available under Rule 57E to fulfill the scheme's objective. The Tribunal also rejected the Collector (Appeals)'s stance that honoring time-barred demands does not entitle MODVAT credit, emphasizing that it is a duty payment for which credit is available under Rule 57E.

Moreover, the Tribunal noted that the certificate issued by Customs authorities was solely for MODVAT credit and not for seeking a refund of customs duty. This clarification invalidated the Collector (Appeals)'s objection regarding the intention behind seeking MODVAT credit. Consequently, the Tribunal allowed the appeal, setting aside the lower authorities' orders and granting appropriate relief to the appellants in accordance with the law.