TMI Blog2013 (9) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... ive wording, we do not find any justification to deny the benefit of MODVAT credit available to a case covered by the credit taken under the Passbook Scheme. In the background of DEPB Scheme and the purpose of MODVAT Scheme, we hold that availing of credit is as good as tax payment for the purpose of Rule 57Q of the Central Excise Rules. Scope of Notification No.34 of 1997 dated 01.04.1997 - Held that:- in view of the limited scope of exemption, the Notification cannot be construed as a non-liability for the purpose of claiming MODVAT credit. Read in the context of the decision of the Supreme Court in EICHER MOTORS LIMITED v. UNION OF INDIA [1999 (1) TMI 34 - SUPREME COURT OF INDIA] and the policy relevant to the period in this case, in the absence of any prohibition in Clause 7.41 of the Export and Import Policy with Handbook of procedures as well as under Rule 57Q of the Central Excise Rules, the assessee will be entitled to relief under Rule 57Q of the Central Excise Rules, irrespective of whether the duty is paid in cash or through credit entry in the passbook. - Decided in favour of Assessee. - C. M. A. Nos. 3539 of 2005 and 3087 of 2009 - - - Dated:- 19-7-2013 - Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Rs.6,58,477/- during the period between July, 1998 and September, 1998. According to the Revenue, as per Rule 57Q(2)(i) of the Central Excise Rules, as the manufacturer of the final product had not paid the additional duty leviable under Section 3 of the Customs Tariff Act, 1975 in cash, he could not avail the benefit under Rule 57Q(2)(I). Thus, on the capital goods, as the assessee had availed the benefit under the Duty Entitlement Passbook Scheme by debiting liability under additional duty as against the credit entry in the Passbook, there was violation of Rule 57Q(2)(i) of the Central Excise Rules. In other words, as the assessee had not paid the additional duty leviable under Section 3 of the Customs Tariff Act in cash, MODVAT credit was not available to the assessee. Thus proceedings under Rule 57Q of the Central Excise Rules were initiated against the assessee to deny the MODVAT credit. The assessee, however, countered the claim of the Revenue that adjustment of the entries on the debit side as regards the duty payable under DEPB scheme is, in effect of payment of duty. Consequently, the question of denying MODVAT credit did not arise. The Revenue, however, rejected the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering the whole objective of the Duty Entitlement Passbook Scheme to neutralise the incidence of basic customs duty on the import content of the export product and the credit available under the Scheme by taking into account the deemed import content of the said export product, the adjustment given by way of credit entry on additional customs duty being in the nature of duty paid, the assessee is entitled to avail MODVAT credit, available under Rule 57Q of the Central Excise Rules. In other words, according to him, the Scheme, as available under the Export and Import Policy, 1997-2002, gives an option to the assessee to have the adjustment of additional customs duty liability as against the credit available in the passbook. Alternatively, it permits the exporter to pay additional customs duty in cash as well, so that the credit in the passbook remains undisturbed. With the option thus available, Clause 7.41 of Export and Import Policy with Handbook of Procedures has to be read along with Clause 7.25 of Export and Import Policy with Handbook of Procedures and wherever the assessee had not exercised the option, the adjustment under MODVAT credit would nevertheless be available on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E.L.T. 341 TANFAC INDUSTRIES LIMITED v. ASSTT. COMMR. OF CUS., CUDDALORE, wherein this Court had referred to the decision of the Apex Court reported in 2008 (229) ELT 3 COMMISSIONER OF CUSTOMS, CALCUTTA v. INDIAN RAYON INDUSTRIES LIMITED and held that when a clearance is allowed in DEEC scheme, even if the duty is not paid in cash but only by way of credit, the same would tantamount to payment of duty in cash. Consequently, unlike the DEEC Scheme, the debit of additional customs duty liability under the DEPB scheme is a mode of payment of duty on the imported goods. He also took us through the decision of the Gujarat High Court reported in 2013 (289) E.L.T. 273 GUJARAT AMBUJA EXPORTS LTD v. GOVERMENT OF INDIA as well as the decision of the Supreme Court reported in 2008 (229) E.L.T. 3 COMMISSIONER OF CUSTOMS, CALCUTTA v. INDIAN RAYON INDUSTRIES LTD., to emphasize his submission that the duty credit under the Scheme has to be treated as payment in cash and that under no circumstances, benefit of MODVAT credit could be denied to the assessee. In this connection, he also placed reliance on Notification No.34/97 Customs dated 7.4.1997, on which heavy reliance was placed by the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viz., March, 1998 to June, 1998 and September, 1998 to January, 1999. A reading of the Policy for the period 1.4.1997 to 31.3.2002 shows that the Government framed duty exemption scheme on Duty Free Licence and Duty Entitlement Pass Book. Duty Free Licence included advance licence granted to a merchant exporter or manufacturer exporter for the import of inputs required for the manufacture of goods without payment of basic customs duty. The case of the assessee falls under DEPB scheme. Paragraph 7.25 of the Export and Import Policy with Handbook of Procedures gives the object of DEPB Scheme as under: "Duty Entitlement Pass Book The objective of Duty Entitlement Passbook Scheme is to neutralise the incidence of basic customs duty on the import content of the export product. The neutralisation shall be provided by way of grant of duty credit against the export product. The duty credit under the scheme shall be calculated by taking into account the deemed import content of the said export product as per Standard Input Output Norms and determine basic customs duty payable on such deemed imports. The value addition achieved by export of such product shall also be taken into account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards payment of excise duty leviable on the final products as specified under the Act or any other Act specified in this behalf. Rule 57Q specified the eligible capital goods and the credit of duty paid on capital goods. Sub Rule (2)(i) to Rule 57Q of the Central Excise Rules, 1944, states that "the manufacturer of the final products shall be allowed credit of the duty of excise or the additional duty leviable under Section 3 of the Customs Tariff Act, 1975 (51 of 1975) (hereinafter referred to as "specified duty") paid on the capital goods." 15. Given the above Rule, the question for consideration is as to whether Paragraph 7.41 has to be read in a restrictive way that the assessee who has not paid the additional duty of customs in cash would be disentitled to claim the benefit under Rule 57Q of the Central Excise Rules. Given the background of DEPB Scheme and the MODVAT Scheme in the Central Excise Act, we do not agree with the contention of the Revenue that unless the assessee pays the additional customs duty in cash, the benefit of MODVAT Scheme would not be available. 16. It is no doubt true that under the Scheme available from 1.4.2000, there is a specific prohibition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come absolute when the input was used in the manufacture of final product. By the application of Rule 57F(4A) of the Central Excise Rules, 1944, the credit attributable to the inputs already used in the manufacture of the final products and which have been cleared from the factory is sought to be lapsed. The Supreme Court observed that when the assessee was entitled to take the credit of the input immediately on the input received in the factory on the basis of the existing Scheme, "incidence following thereto must take place in accordance with the scheme under which the duty had been paid on the manufactured products." In that context, the Supreme Court held that "provision for facility of credit is as good as tax paid till tax is adjusted on future goods on the basis of the several commitments which would have been made by the assessees concerned." 19. Reading the above to the case on hand in the background of DEPB Scheme and the purpose of MODVAT Scheme, we hold that availing of credit is as good as tax payment for the purpose of Rule 57Q of the Central Excise Rules. 20. Secondly, we may point out that in the decision of this Court reported in 2009 (240) E.L.T. 341 TANFAC IN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ENERAL EXEMPTION NO.84-J Signature Seal of licensing authoriity Date (Notification No.31/97-Cus., dated 1-4-1997 as amended by Notification No.95/97-Cus., dated 19-12-1997; No.10/98-Cus., dated 23-4-1998 and corrected by CorrigendumF.No.605/55/98-DBK, dated 25-5-1998; No.49/99-Cus., dated 29-4-1999 and No.121/99 -Cus., dated 4-11-1999, and corrected by M.F. (D.R.) corrigendum Drawback/P.N. 3/99, dated 29-6-1999.] GENERAL EXEMPTION NO.84-J Exemption to Imports made under Duty Entitlement Pass Boom. -- In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts goods imported into India from - (1) the whole of the duty of Customs leviable thereon which is specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975); and (2) the whole of the additional duty leviable under section 3 of the said Customs Tariff Act where specifically claimed by the importer, subject to the following conditions, namely :- (i) That the importer has been issued a Duty Entitlement Pass Book by the Licensing Authority in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the case where the assessee pays the duty by way of credit entry, in which event, the question of exemption of the notification, does not operate. 23. Thus, in view of the limited scope of exemption, the Notification cannot be construed as a non-liability for the purpose of claiming MODVAT credit. Read in the context of the decision of the Supreme Court reported in 1999 (106) E.L.T. 3 EICHER MOTORS LIMITED v. UNION OF INDIA and the policy relevant to the period in this case, in the absence of any prohibition in Clause 7.41 of the Export and Import Policy with Handbook of procedures as well as under Rule 57Q of the Central Excise Rules, the assessee will be entitled to relief under Rule 57Q of the Central Excise Rules, irrespective of whether the duty is paid in cash or through credit entry in the passbook. 24. In the circumstances, we hold that the view of the Tribunal is contrary to the decision of the Apex Court as well as that of this Court stated supra. Consequently, we have no hesitation in setting aside the order of the Tribunal in so far as the assessee's case is concerned in C.M.A.No.3087 of 2009 and thereby allow the same. No costs. 25. In the light of the reason ..... X X X X Extracts X X X X X X X X Extracts X X X X
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