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TMI Blog2008 (8) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmed the recovery thereof, and also imposed a penalty of Rs. 50,000/- under Rule 173Q(1)(bb) of the Central Excise Rules, 1944. The appeal was admitted on 7-4-2006, by framing the following substantial question of law :- "(1) Whether Modvat credit could be availed on indigenous inputs used in manufacture of goods exported to discharge the export liability under Advance Licence Scheme, after raw material imported against such export replenished the stock of inputs with the manufacture on payment of CVD? (ii) Whether availing of drawback under the Export Scheme in respect of the export transaction results in forfeiture of claim to avail Modvat credit in respect of replenished raw material under the Central Excise Act 1944?" 2. The ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit on the inputs under Rule 57A. Likewise, in column 4, the assessee had further declared, that the export is under duty drawback, while on examination of Central excise records and R.T.12 return of the assessee, it was found, that the assessee had taken Modvat credit on the inputs used in the manufacture of exported goods, and they have not received any duty free consignment of PP Granules (Inputs) from anyone, for exporting the goods on his behalf till the date of above-said exports, and they have also not reversed any credit taken on the inputs used in the goods exported vide above referred AR4s. Thus, the assessee was found to have wrongly taken credit of modvat, to the tune of Rs. 5,37,799/-, which was not admissible. 3. The Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of the matter, the issue could not be mixed up by the department, to deny the Modvat credit to the assessee, and to order recovery thereof. 5. The learned counsel for the Revenue, on the other hand, supported the impugned order, and contended, that the assessee has played very smart, by exporting the goods under AR4, and a bond under Rule 13, giving out, that Modvat credit has not been availed, but then Modvat credit was availed, may be hyper technically, subsequent in point of time, but then, it did relate to the same inputs. It was contended, that may be that the department could have taken proceedings under the Customs and Central Excise Duties Draw Back Rules, 1971, but then, since the Modvat credit was wrongly taken, he was rightly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... But then, that is not the end of the matter. 8. This much is not in dispute, that if the goods were to be indigenously sold, and were to be sold without AR4, the goods were liable to levy of excise duty, and it is only on account of the assessee having submitted AR4s, and the bond under Rule 13, that excise duty was not paid. In respect of the exports made under AR4 and under bond, excise duty is not leviable, but the corresponding benefit is that the manufacturer is permitted to import inputs on payment of CVD (countervailing duty), and after processing and manufacture of final product, from out of import, the assessee is permitted to avail the draw back, to the extent of the said CVD. Thus, the import on CVD, of inputs, its processing an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said notification (hereafter, in this section, referred to as the specified duty) paid on the goods used in the manufacture of the said final products (hereafter, in this section, referred to as the inputs). (2) The credit of specified duty allowed under sub-rule (1) shall be utilised towards payment of duty of excise leviable on the final products, whether under the Act or under any other Act, as may be specified in the notification issued under sub-rule (1) and subject to the provisions of this section and the conditions and restrictions, if any, specified in the said notification." 10. A reading of the above provisions does make it clear, that the Modvat credit is to be utilised towards payment of duty of excise, leviable on final p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having not availed the Modvat credit with respect to inputs used in manufacture of the finished products exported under the declaration, and cannot be confined to the precise point of time of having submitted the declaration, i.e. not having availed the Modvat credit till the time of submitting the declaration. If the interpretation as sought to be put by the assessee, about correctness of not having availed the benefit till the point of time of submitting declaration is accepted, it would open flood gates of availing Modvat credits, not otherwise admissible, inasmuch as, in any number of cases the things may be managed in the manner, that Modvat credit is availed, right in the next second of submitting the declaration, even on the same dat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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