By TIOL News Service

CHENNAI, NOV 29, 2017: THE assessee company availed MODVAT credit paid on the raw materials on the strength of the original copy of the triplicate copy of Bill of Entry as provided for in the MODVAT Rules.

Thereafter, the assessee sent the original copies of the triplicate copy of Bill of Entry to their Head Office at Chennai for budgetary preparation for the year 1993-94. While the same was sent back to the Cuddalore factory, during transit, it was lost. Thereafter, when the assessee company filed returns with the Excise Authorities, since the original of the triplicate bills were lost, those documents were not produced.

A SCN was issued seeking to deny the credit availed and for imposition of penalty.

In their reply, the assessee informed that they had approached the Assistant Commissioner of Customs, Madras, who after scrutiny of documents, had issued attested triplicate copy of Bills of Entry.

However, the adjudicating authority rejected the plea of the assessee and denied the credit. Another SCN on similar lines also met the same fate.

In appeal, the Commissioner(A) set aside the orders passed by the original authority.

Revenue went in appeal and the Tribunal vide its order dated 15.03.2001 set aside the order(s) of the lower appellate authority.

The assessee is before the Madras High Court and the following three questions of law were framed -

"1. Whether a certified copy of bill of entry filed under the Customs Act, 1962 can be accepted as a specified document under Rule 57G of Central Excise Rules, 1944 for the purpose of availment of MODVAT credit?

2. Whether the first respondent was justified in law while denying the availment of MODVAT credit by the appellants on mere technical grounds when actually there is no dispute regarding the duty payment and the usage of the inputs in the manufacture of final products ? And

3. Whether the first respondent was by law justified in setting aside the order of the second respondent when there is substantive and substantial compliance of Rule 57G(2) of the Central Excise Rules?"

The appellant narrated the facts and submitted that the issue as to whether MODVAT credit can be allowed for an imported raw material without submitting the documents enumerated under Section 57G(3) of the CER has already been decided in a number of cases, in favour of the assessee, especially, in the context, where, if the importer / manufacturer actually brought the inputs to the factory and utilized the same for manufacturing of finished goods. Reliance is placed on the Division Bench judgment of the Allahabad High Court in COMMR. OF CUS.& C.EX. VS. MATSUSHITA TELEVISION & AUDIO INDIA LTD - 2015-TIOL-2003-HC-ALL-CX .

The counsel for the Revenue emphasised that the photocopy of original documents cannot supplant the necessity of producing original documents as contemplated under Rule 57G(3) of CER, 1944 in order to avail of MODVAT credit. [COMMISSIONER OF C. EX., ALLAHABAD VS. HINDALCO INDUSTRIES LTD. - 2012-TIOL-257-HC-ALL-CX relied upon]

After considering the submissions made, the High Court extracted rule 57G(3) of the CER, 1944 and noted that the triplicate copy of Bill of Entry is one of the documents in clause (c) of Rule 57G(3).

Nonetheless, it was observed that in the case law cited by the appellant (supra), the following question of law had been framed by the said Court and which is exactly similar to that of the 1st question of law framed in this case, namely -

"Whether on the facts and circumstances, the MODVAT credit can be taken on the basis of the photostat copy of BOE ?"

The High Court further observed –

"24. Here, in the case in hand, almost a similar situation was prevailing where, the goods imported were received in the factory of production and the same were covered by the requisite documents including the triplicate Bill of Entry which was lost subsequently and in lieu thereof, the assessee had produced duly attested / certified photocopy of the triplicate Bill of Entry.

25. The only difference between the said case and the case in hand is, there, the alternative document produced was "exchange control copy" obtained from bank, here, the alternative document was "certified photostat copy of the triplicate Bill of Entry"."

The following reasoning and conclusion recorded by the Division Bench of the Allahabad High Court was reproduced by the Bench –

"8. We find that there is no allegation in the show cause notice that the goods in question were not received under the cover of the relevant documents and that the goods were duty paid. The Assistant Commissioner Central Excise Division-III, NOIDA has also not disputed the duty paid character of the goods and the fact that these were received in the factory for intended purpose under the cover of relevant documents. The case of the department is that the triplicate copy of bill of entry as required under Clause (c) of subrule( 3) of Rule 57G could not be subsequently produced by the assessee for defacement. The stand taken by the assessee that the triplicate copy of the relevant bill of entry was misplaced, was also not disbelieved either by the Assistant Commissioner or by the first appellate authority. Since the triplicate copy of the bill of entry was misplaced and, as such, the assessee obtained from the bank the exchange control copy of the relevant bill of entry and filed the same along with various other documents. He also executed an indemnity in favour of the Central Excise department to the extent of Modvat credit availed. The said authenticated exchange control copy of the bill of entry obtained by the assessee from the bank could have been easily verified by the authorities. It is not the case of the appellant that the said document was not verifiable. "

Thereafter, the High Court observed –

"27. Here also, if the same analogy is adopted, the certified photostat copy of the triplicate Bill of Entry, since was issued by the Customs Authorities, can very well be verified by the Excise Authority, therefore, it cannot be said that the MODVAT Credit claimed by the assessee is without any document within the meaning of Rule 57G(3)."

Examining each of the case laws cited by the counsel for the Revenue and distinguishing the same, the High Court concluded that the facts as well as the finding given by the Division Bench of the Allahabad High Court in the case of MATSUSHITA TELEVISION & AUDIO INDIA LTD - 2015-TIOL-2003-HC-ALL-CX would squarely apply to the case on hand.

Inasmuch as -

"46. …, the principles which can easily be culled out … is that, the aspects mentioned in Rule 57G, especially in the context of filing documents to claim MODVAT credit is procedural and if at all there is any lacuna on the part of the assessee in complying with these procedural requirements of filing documents that would not affect the substantive right of the assessee to claim MODVAT credit."

The High Court also adverted to the Circular No. 441/7/99 CX dated 23.2.1999, issued in the matter of enquiries to be conducted before issuance of SCN on grounds of wrong availment of MODVAT credit on procedural grounds, so as to reduce litigation.

Accordingly, the impugned order of the Tribunal was set aside and the questions of law framed in the appeal were answered in favour of the assessee and against the Revenue.

The Civil Miscellaneous Appeal was allowed.

(See 2017-TIOL-2479-HC-MAD-CX)