2018 (6) TMI 138 - AT - Customs

Recovery of duty foregone on goods at the time of import - N/N. 204/92-Cus dated 19th May 1992 - imported goods deployed for the purpose other than mentioned in notification - appellant contends that MODVAT credit attributable to inputs used in the export had been surrendered - Held that - The obtaining of redemption certificate from the licensing authority is merely a technical formality. We take note that the redemption certificate has been issued albeit subsequently without casting any doubts on the exports claimed to have been effected by the appellant in their application to the licensing authority for redemption certificate. Nor is there any evidence from Revenue that the exports claimed to have been fulfilled are questionable - there can be no controverting that the export obligation has been fulfilled in substance at the time of utilization of imported raw material. We are convinced that the appellant had taken steps to reverse the MODVAT credit. Whether the reversal did occur or not is still an open to question; despite the specific directions of the Tribunal vide order dated 23rd October 2017 Commissioner (Exports) Mumbai-II has not been able to illuminate us with a specific report. Remand the matter back to the original authority with the following specific directions a) To ascertain within a period of forty five days whether the reversal of MODVAT credit has taken place by encashment of the cheque. b) In the event of a determination that the MODVAT credit has not been reversed to give an opportunity to the appellant to do so within a further forty five days and upon either contingency being confirmed the demand shall stand dropped along with penalties.

Summary

Issues:
Recovery of duty foregone on imported goods, compliance with Duty Exemption Entitlement Scheme, denial of privilege for completed export obligation, reversal of MODVAT credit, diversion of goods, issuance of redemption certificate, submission of evidence for reversal of MODVAT credit.

Analysis:
The judgment pertains to two appeals challenging the order-in-original confirming the recovery of duty foregone on imported goods under the Duty Exemption Entitlement Scheme. The scheme allowed importers to procure raw materials for specified goods, subject to fulfilling export obligations. The dispute arose as the licensee completed the export obligation using indigenous raw material before imports, leading to denial of privilege. The original authority upheld the demand citing non-reversal of MODVAT credit on input materials and deployment of imported goods for unintended purposes.

The appellant argued that they surrendered MODVAT credit by depositing a cheque and that the seized goods were delivered to job-workers, not diverted. The Authorized Representative stressed strict compliance with scheme conditions, including non-availment of MODVAT credit and obtaining a redemption certificate. The Tribunal noted that obtaining a redemption certificate was a technical formality and found no evidence questioning the exports claimed by the appellant. The Tribunal acknowledged steps taken by the appellant to reverse MODVAT credit but awaited a decisive report from the Commissioner (Exports), Mumbai-II.

Given the prolonged litigation, the Tribunal remanded the matter to the original authority with specific directions. The authority was tasked with verifying the reversal of MODVAT credit within forty-five days. If not reversed, the appellant would be granted a further forty-five days to comply, failing which the demand and penalties would be dropped. The appeals were disposed of accordingly, emphasizing the need for expeditious resolution due to the extended duration of the case.