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TMI Blog2004 (1) TMI 666X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the goods adopted for the purpose of levy of entry tax under the Act. The petitioner submits that as per the MODVAT Scheme formulated under the provisions of the Central Excise Act, 1944 and the Central Excise Rules, 1944, a manufacturer is entitled to a credit of the excise duty paid on the inputs used in the manufacture of final products. The petitioner contends that under the MODVAT Scheme, it is entitled to MODVAT credit on all eligible inputs received by it in its factory for manufacture of final products; that it is entitled to utilise such credit, for payment of excise duty on the final products manufactured by it; and that therefore it is entitled to deduct the MODVAT credit amount availed by it, namely Rs. 57,65,64,844, from the total value of goods, entry of which is caused by it into the local area, to arrive at the value of goods that can be subjected to entry tax. Elaborating the said contention, it is submitted that though it pays a particular price for the goods (purchased by it for being used in the manufacture of final products), on the entry of such goods within the local area and entry in its factory premises, it has an indefeasible right to take a credit i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contention of the petitioner on merits, the petitioner has chosen not to file a writ petition in view of a division Bench decision of the Karnataka High Court. In our opinion, it will be more appropriate for the petitioner to approach the Karnataka High Court and make the submission there. Liberty granted to the petitioner to approach the High Court by way of an appropriate petition and this petition is dismissed as withdrawn. Thereafter, the petitioner has filed these petitions for the following reliefs: (i) To declare that for the purpose of determining the value of goods for levy of entry tax under the KTEG Act, the MODVAT credit availed by an assessee on such goods is liable to be deducted. (ii) To declare that the decision of this court in MICO's case in so far as it relates to disallowance of MODVAT credit availed in computing the assessable value of goods under the KTEG Act is incorrect and unenforceable. (iii) To declare that the petitioner is entitled to a deduction of Rs. 57,65,64,884 for the assessment year 1996-97 under the KTEG Act in determining its taxable turnover under the said Act, and quash the order of assessment dated March 31, 2000 in so far ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). The Supreme Court answered the question in favour of the assessee by holding that the excise duty paid on the raw material will not form part of the cost of the excisable product for the purposes of section 4(1)(b) of the Central Excise Act, 1944 read with rule 6 of Valuation Rules. After referring to rules 57A to J of the Central Excise Rules, the Supreme Court held thus: 18. It is clear from these rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgement thereof. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. There is no provision in the rules which provides for a reversal of the credit by the excise authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilised, has to be paid for. We are here really concerned with credit that has been validly taken, and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unting practices would be relevant. The decision makes it clear that the principles laid down therein have no relevance for determination of the value of goods under other enactments, which may prescribe different principles to determine the value of the goods. In fact, in the same decision the Supreme Court recognised the position that the principles relating to valuation laid down in an enactment will have no bearing on the principles applicable regarding valuation in other enactments by stating thus: The learned Attorney General submitted that judgments relating to the Income-tax Act or other statutes had no relevance while considering a provision in an excise statute. There can be no doubt about the correctness of this proposition, . . . . We are concerned with determination of value of goods under the KTEG Act. Section 3 which is the charging section provides that there shall be levied and collected a tax on entry of any goods specified in First Schedule into a local area for consumption, use or sale therein at such rates not exceeding 5 per cent of value of goods as may be specified. The term value of goods is defined in section 2(A)(8a) thus: 'Value of goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turer of goods at a place outside the local area and brings the goods within the local area he must have determined the price of the goods. Therefore, the dealer has some specific price of the scheduled goods which are being brought within the local area at the time of entry in the local area and the entry being the taxing event that would be the price which alone can be taken into account for computing the tax ad valorem. (Emphasis Here italicised. supplied). For the purpose of entry tax, what is relevant is the value of goods when the goods enter the local area. The fact subsequent to such entry, the assessee received the goods in his factory and took MODVAT credit for the Excise duty paid on such goods, will not have the effect of reducing the value of the goods on entry into the local area. This can be demonstrated by an example. Let us take a case where the same excise suffered goods is purchased for a price of Rs. 100 (of which excise duty paid by the seller is Rs. 10 from the same seller by three different purchasers and brought into the local area, the three purchasers being: (a) a dealer who intends to sell it in the local area; (b) a manufacturer who intends to use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing such raw material. Referring to the example given in Dai Ichi Karkaria's case [1999] 7 SCC 448, the division Bench held: So far as the assessee is concerned, he has paid Rs. 100 to the seller as value of the goods. The subsequent benefit by way of MODVAT it would not be claimed at the time of entry of goods into the local area. The act of claiming the MODVAT is after the goods enter in the factory premises and not at the stage when the entry is in the local area. In these circumstances for the purpose of entry tax, the purchase value of goods is as specified in the bill including all other charges as mentioned in clause (8a) of section 2 thereof included. Therefore the above decision in Dai Ichi [1999] 7 SCC 448 cannot give any benefit to the assessee. (Emphasis Here italicised. supplied). MODVAT credit does not operate as a reduction or discount in the purchase price paid to the supplier. MODVAT is only a procedure whereby the manufacturer utilises the credit for specific excise duty on inputs against duty payable on the final product. MODVAT credit taken on inputs is in the nature of set-off available against the payment of excise duty on the final product. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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