2013 (3) TMI 301 - HC - Central Excise

MODVAT Credits taken in RG 23A Part II Account after expiry of 6 months from the date of document (Bill of Entry) - Whether the Commissioner of Appeals and the Appellate Tribunal are right in allowing the credit when there is a provision under Rule 57G (5) of Central Excise Rules, 1944 stipulating 6 months time limit for taking such credit? - whether the date of endorsement in the Bills of Entry is the date of issuance of the document as contemplated under sub-rule 5 or the date of Bills of Entry is the date of issue of such document? - Held that - Admittedly, in this case, the endorsement was made by the Customs department on 3.7.2000, after a considerable delay. It is also an admitted fact that on the very same day, the Respondent took credit in RG23A Part II Register. A plain reading of sub-rule 5 may indicate or suggest that the date of the Bills of Entry in this case as the relevant date. But, when we look into the language of the said provision, it would further reveal that the words date of issuance of the document should be read with wider meaning so as not to confine with the date of document alone and it can be further extended to the date of issuance of such document. Here, in this case only after the endorsement was made by the Customs department the issuance of such document viz., Bills of entry takes effect in favour of the Respondent. Therefore, the language used in sub-rule 3 that the inputs are received in the factory under the cover of any of the following documents shall have to be read to mean and referable to a valid document and not a document simplicitor . Necessarily, the authority should go into the question of validity of each and every document referred to under sub-rule 3 by taking into consideration of the facts and circumstances of each case. Therefore, when the Respondent in this case, admittedly not the importer of the inputs and the same were only supplied to them by the importer viz., M/s. Goodyear India Limited, then the date of endorsement made by the Customs department is to be taken as the date of issuance of such document and consequently, if the Respondent had availed credit within six months from the date of making such endorsement, thus the Respondent is well within the time, as contemplated under sub-rule 5 in claiming the credit under Rule 57G sub-rule 2. The delay in taking the credit is only due to delay in endorsing the Bills of Entry by Customs authorities and therefore, benefit of MODVAT credit cannot be denied to the Respondent. No interference in the order of the Tribunal required -in favour of assessee.

Issues Involved:

1. Whether the Commissioner of Appeals and the Appellate Tribunal are right in allowing the credits taken in RG 23A Part II Account after expiry of 6 months from the date of document (Bill of Entry) when there is a provision under Rule 57G (5) of the Central Excise Rules, 1944 stipulating 6 months time limit for taking such credit?
2. Whether the diversion of imported goods in question by M/s. Goodyear India Limited (Importer) to M/s. S.R.F. Limited (Manufacturer) without endorsement on the Bill of Entry by Customs authority for availing MODVAT Credit of duty under Rule 57G of Central Excise Rules, 1944 is correct as per Board's Circular No.179/13/96 CX dated 29.02.1996?

Issue-wise Detailed Analysis:

Issue 1: Allowing Credits After Expiry of 6 Months

The primary contention revolves around the interpretation of Rule 57G sub-rule 5 of the Central Excise Rules, 1944, which stipulates a six-month time limit for taking credit of duty paid on inputs. The Respondent, M/s. S.R.F. Limited, took credit of Rs. 13,22,122/- in their MODVAT Account (RG23A Part II) on 03.07.2000, after a lapse of six months from the date of payment of Countervailing Duty by the original importer, M/s. Goodyear India Limited. The Adjudicating Authority ordered recovery of the said amount and imposed a penalty, asserting that the Respondent was not eligible for the credit due to the delay.

However, the Commissioner (Appeals) and the Tribunal observed that the delay in taking credit was due to the delay in endorsement by the Customs authorities. The Commissioner (Appeals) held that the endorsed Bills of Entry were received by the Respondent on 03.07.2000, and credit was taken on the same day, thus there was no delay post-receipt of the endorsed documents. The Tribunal upheld this view, stating that the Revenue cannot take advantage of their own default, i.e., the delay caused by the Customs authorities.

The High Court concurred with the Tribunal and the Commissioner (Appeals), interpreting that the "date of issuance of the document" under sub-rule 5 should be read with a wider meaning, extending to the date of endorsement by the Customs department. Therefore, the Respondent taking credit within six months from the date of endorsement was deemed compliant with Rule 57G sub-rule 5.

Issue 2: Diversion of Imported Goods Without Endorsement

The second issue pertains to the procedural correctness of the diversion of imported goods from M/s. Goodyear India Limited to M/s. S.R.F. Limited without endorsement on the Bill of Entry by the Customs authority. According to the Board's Circular No.179/13/96 CX dated 29.02.1996, such endorsement is necessary for availing MODVAT Credit.

The Respondent argued that even though they possessed the Bills of Entry, they could not utilize them for availing credit without the necessary endorsement by the Customs department. The High Court agreed with this contention, stating that the Bills of Entry get their validity for availing credit only when endorsed by the Customs department. The language of Rule 57G sub-rule 3, which requires inputs to be received under the cover of specified documents, was interpreted to mean 'valid documents' with necessary endorsements.

The High Court concluded that the date of endorsement should be considered as the date of issuance of the document for the purpose of Rule 57G sub-rule 5. Consequently, since the Respondent availed the credit within six months from the date of endorsement, their action was within the permissible time frame.

Conclusion:

The High Court upheld the decisions of the Commissioner (Appeals) and the Tribunal, affirming that the delay in taking credit was attributable to the Customs authorities' delay in endorsing the Bills of Entry. Therefore, the Respondent was entitled to the MODVAT credit, and the substantial questions of law were answered in favor of the Respondent. The appeal by the Revenue was dismissed with no costs.

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