CC Vs. MORGON INDUSTRIES LTD.

JUDGEMENT

(1.) IN terms of Value -Based Advance Licences (VABALs) issued to them by the competent authority under the Export Import Policy 1992 -97, the respondents had imported various materials for the manufacture of goods meant for export under Duty Exemption Entitlement Certificate Scheme (DEEC scheme) and such materials were cleared under different Bills of Entry without payment of duty in terms of Notification No. 203/92 -Cus dt. 29.5.92. One of the conditions for exemption under the Notification (vide para (v) thereof) was that the export obligation had to be discharged by exporting goods in respect of which no input stage credit had been obtained under Rule 56A or 57A of the Central Excise Rules, 1944. The department, upon verification of records, found that the respondents had availed Modvat credit on inputs used in the manufacture of their products which were exported under the above scheme, thereby violating the above condition of the Notification. On this basis, a show -cause notice dated 20.11.95 was issued to the party denying the benefit of the above Notification to them in respect of the imported materials and, accordingly, demanding Customs duty of Rs. 8,19,595/ - from them under Section 28(1) of the Customs Act. The notice also demanded interest @ 24% per annum on the duty amount from the date of clearance of the goods to the date of payment. Confiscation of the imported goods and penalty on the importer were also proposed. In their reply dated 8.12.95, the respondents submitted that they had expunged the above Modvat credit in April -May 1995. Later on, in a letter dt. 18.11.97, they claimed that they had expunged the entire Modvat credit on the inputs used in their export products and had also paid interest on the amount. The adjudicating authority (Commissioner) noticed that the party had reversed the total credit of Rs. 1,61,057/ -, a major part of which was reversed prior to 31.1.97 (date on which the Central Government introduced an amnesty scheme relaxing the aforesaid condition of the Notification so as to enable the importers/exporters under the DEEC scheme, who had availed input stage credit in respect of export goods, to reverse such credit in a time -bound manner) and the remaining portion (Rs. 40,528/ -) was reversed after that date, i.e. during April to November 1997. It was also noted that the reversal of credit was as per the Board's formula. Interest on the credit amount, amounting to Rs. 44,988.44, was found to have been paid on 12.11.97. Ld. Commissioner condoned the delay of Modvat credit reversals and held that the assesses had substantially complied with the conditions of the Exemption Notification. On this basis, the demand of duty and other proposals raised against the assessee in the SCN were dropped. Hence present appeal of the department.

(2.) THE principal ground of this appeal is that the Govt. had introduced the amnesty scheme in exceptional circumstances and it was not open to the Commissioner to grant any further relaxation of its terms and conditions. Where it was found that the respondents had reversed apart of the input stage credit only after 31.1.97 and had also paid the entire amount of interest on credit long after the said date, the adjudicating authority ought to have denied the benefit of Notification No. 203/92 -Cus. ibid to the assessee and, accordingly, the demand of duty should have been confirmed against them. The authority also should have imposed penalty on the party. In support of this plea of the appellant, ld. SDR has relied on the judgment of Hon'ble Supreme Court in Bharti Telecom Ltd. v. CC , wherein the party, who had reversed input stage credit prior to 31.1.97 but deposited the interest thereon only after the said date, was held to have violated the condition laid down in para v(a) of the above Notification and, accordingly, the demand of duty on the raw materials imported duty -free in terms of the said Notification was upheld by the court. Ld. SDR has referred to Final Order No. 652/2003 dated 22.8.2003 passed by this Bench in the case of CC v. Aksa Poly Bags Ltd. (appeal No .C/1347/98), whereby, following the above judgment of the apex court, the bench sustained a similar demand of duty against the party. Ld. counsel for the respondents raised a preliminary objection. He submitted that the review order of the Board had not been signed by the Member concerned. He also expressed doubt whether that order had been passed within the prescribed period of limitation. On the merits of the case, he suggested that, in the event of interference with the impugned order, the case be remanded to the Commissioner for licence -wise assessment of the Modvat credit reversals.

(3.) AFTER a perusal of the Board's original file (pertaining to review of the Commissioner's order) produced by SDR, we are satisfied that the review order was made within the prescribed period of limitation. We have, also, overruled the other "preliminary" objection raised by the counsel inasmuch as this objection was never raised on behalf of the respondents earlier during the long period of pendency (6 years) of this appeal. Accordingly, we have proceeded to examine the case on merits. This Bench has of late dealt with a similar case in which a part of Modvat credit reversal and interest payment was made by the party after 31.1.97 (deadline under the amnesty scheme). In that case also, numerous VABALs were involved. In that ease, we have remanded the case to the adjudicating authority for fresh assessment of Modvat credit reversals licencewise vide Final Order No. 212/2006 dated 29.3.06 in the case of MRF Ltd. v. CC (appeal No. 0169/2002). Following the precedent, we set aside the impugned order and direct ld. Commissioner of Customs to make licencewise assessment of Modvat credit reversals and, on that basis, proceed to demand duty, if any. Whether to impose any penalty and, if so, to what extent shall also be examined afresh by the adjudicating authority. These shall be done in terms of our Final Order No. 212/2006 dated 29.3.2006 ibid. The appeal stands allowed by remand.