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TMI Blog2010 (12) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... al. By the order in original, the Assistant Commissioner had disallowed the Modvat credit of Rs. 5,37,799, and confirmed the recovery thereof, and also imposed a penalty of Rs. 50, 000 under Rule 173 Q (1) (bb) of the Central Excise Rules, 1944 (for short "the Rules"). 3. The necessary facts, in brief are, that the show cause notice dated 15.2.1999 was issued to the assessee alleging that it had wrongly taken credit to the extent of Rs. 5,37,799 under Rule 57A of the Rules, during August 1998. The notice also called upon the assessee to show cause and explain as to why the aforesaid credit, wrongly taken by the assessee should not be disallowed/recovered under provisions of Rule 57-I, and also why penal action under Rule 173Q (1)(bb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above-said exports, and that they had also not reversed any credit taken on the inputs used in the goods exported vide above referred AR4s. Thus, the assessee, it was alleged, had wrongly taken credit of Modvat, to the tune of Rs. 5,37,799, which was not admissible. 6. The Assessing Officer confirmed the demand, which was set aside in appeal, and was reconfirmed in further stages of appeal, as delineated above. 7. The High Court dismissed the appeal, holding that the assessee had resorted to subterfuge and impermissible technicalities in attaining its desired end to claim the Modvat credit. While the High Court admitted that the assessee had not indeed claimed the Modvat credit on the inputs at the date when Form AR4s were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be exported under AR4. Obviously, not only at the cut off time of giving declaration AR4, but also at any time in future." Based on this line of reasoning, the High Court deemed it fit to dismiss the appeal preferred by the assessee. Aggrieved by the decision of the High Court the appellant-assessee has approached this Court by way of this Special Leave to Appeal, on which we have granted leave. 8. The appeal was listed for hearing and we heard the learned counsel appearing for the parties who have ably taken us through all the relevant documents on record and also placed before us the various decisions which may have a bearing on the issues raised in the present appeal. 9. Before we outline the arguments led by the partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee in respect of the goods imported to be used in manufacture. Therefore, the crux of the entire case at hand is whether the assessee has been at the receiving end of a double benefit, having claimed credit twice for the raw materials used. 12.To fortify its stance, the assessee contended before this Court that it had taken credit of the duty on indigenous inputs only after the replenishment arrived. That is to say, the assessee had not claimed Modvat credit at the time the declarations under the advance license scheme were filed, but only later. It was further contended by the assessee that it has not gained any extra benefit except as provided under law. While fulfilling the export obligation under the Advance Licensing S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, the question to note is whether there were two separate duties that arose, for the assessee to claim credit on both, or if the entire process is to be considered as a single cycle, which culminated in the export of goods under the Advance Licensing Scheme? 15.The statutory position regarding the specified benefits is postulated in Rule 57A of the Rules. "Rule 57A. Applicability.-(1) The provisions of this section shall apply to such finished excisable goods (hereafter, in this section, referred to as the final products) as the Central Government may, by notification in the Official Gazette, specify in this behalf for the purpose of allowing credit of any duty of excise or the additional duty under Section 3 of the Cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the specified mechanism to avail of a benefit on the imported inputs, while availing of Modvat credit on the indigenous raw material used in the manufacture of the same, exported goods. In effect, the assessee has not only availed of Modvat credit on the indigenous input, but also drew back countervailing duty paid on imported inputs that were mere stock replenishments, which amounts to a double benefit. That the Modvat credit was technically claimed only subsequent to the filing of AR4 declarations, although the indigenous goods were used in the manufacturing process apriori does not also reflect well on the intention of the assessee. The assessee has merely resorted to the technicality of claiming Modvat credit subsequent to the AR4 de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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