1999 (2) TMI 245 - AT - Central Excise

Summary

Issues:
- Admissibility of Modvat credit for duty paid on imported inputs
- Compliance with Modvat rules and Customs Act provisions
- Interpretation of Modvat scheme in harmony with Customs Act

Admissibility of Modvat credit for duty paid on imported inputs:
The appeal filed by Revenue challenged the order of the Commissioner of Central Excise, New Delhi dropping proceedings against the respondent, a safety glass manufacturer availing Modvat credit for duty paid on imported float glass sheets. The Department alleged that the Modvat credit claimed was not admissible as the inputs were not received against duty paying documents. However, the Commissioner held that denying Modvat credit would contradict the permission granted to the respondent for receiving finished goods without duty payment under the Customs Act. The Commissioner emphasized that the respondent had followed the procedure for several years without objection and that the objection raised by the Department was frivolous.

Compliance with Modvat rules and Customs Act provisions:
The Department argued that Modvat rules required receipt of inputs under prescribed duty paying documents for credit eligibility, which the respondent did not satisfy. The Department contended that the inputs had not suffered duty at the time of receipt or issue for manufacturing. In contrast, the respondent's counsel highlighted that the respondent followed the prescribed procedure at every stage, importing float glass sheets without duty, warehousing, and issuing inputs for manufacturing under bond with proper payment of customs duty/CVD. The counsel asserted that the respondent had fully complied with the Modvat procedure and the Customs Act provisions.

Interpretation of Modvat scheme in harmony with Customs Act:
The Tribunal considered the Department's argument that Modvat credit eligibility required receipt of inputs under duty paying documents. However, the Tribunal noted that the respondent had complied with the provisions of the Customs Act regarding warehousing and manufacture under bond. The Tribunal agreed with the Commissioner that the Modvat scheme should be interpreted in harmony with the Customs Act. Denying benefits to the assessee for complying with Customs Act provisions would not be correct merely based on the Modvat rules' procedural requirements. The Tribunal found no fault in the Commissioner's decision to drop the proceedings seeking to deny Modvat credit to the respondent.

In conclusion, the Tribunal upheld the Commissioner's order, rejecting the Revenue's appeal. The judgment emphasized the importance of interpreting the Modvat scheme in conjunction with the provisions of the Customs Act to ensure that due compliance with statutory requirements is duly recognized and rewarded.