Judgment:
1. This appeal arises from Order-in-Appeal No. 25/2000 (M-I) dated 31.1.2000 wherein among other points, the Commissioner (Appeals) has considered the aspect pertaining to claim of Modvat Credit on the basis of payment of duty which has been done in terms of pass book under the scheme of Duty Entitlement Passbook (DEPB) imports. He has noted that any credit made in the pass book for any amount of duty cannot be utilized as Modvat Credit in the Central Excise Law. He has noted that the Asst. Commissioner had correctly held that only when duty is paid by cash as evidenced in the Bill of Entry, Modvat Credit can be taken and not otherwise. He has, however, held that the case is covered by DEPB scheme and is not eligible for capital goods credit. He has noted that appellants were free to conserve by DEPB credit for some other import under the scheme if they so wished and paid duty by cash only, if they had intended to claim capital goods credit under the Central Excise Law.
2. Ld. Counsel Shri S. Ignatius submitted that the issue is no longer res integra and the matter is covered by the Tribunal's judgment on the like issue rendered in the case of Polyhose India Pvt. Ltd v. CCE Chennai, 2003 (152) ELT 361 (Tri-Chennai). He further, submitted that t here is no bar on the party taking the benefit in respect of credits in the DEPB scheme, He, referred to the Bill of Entry wherein the payment has been adjusted under the DEPB scheme. He further, referred to the Import Export (Exim) Policy 1998 which is the period in Issue and stated that there was no specific prohibition with regard to taking credit on capital goods in the matter. He submitted that it is only during the subsequent period in the EXIM Policy that is for the period 2002-2007, it was laid down that the credit on DEPB scheme cannot be utilized for availing the Modvat Credit except if it is paid through cash. He submitted that for the relevant period, no rules had been made and in terms of Rule 57A (Hi) preventing the credit earned through DEPB and benefit cannot be denied.
3. Ld. DR, Shri A. Jayachandran submitted that EXIM Policy 2002-2007 had been incorporated that credit earned in DEPB scheme cannot be utilized for Modvat Credit except paid through credit, He submitted that the clarification relates back to the period in question also and hence benefit should not be granted. He, further, submitted that DEPB scheme was under the Commerce Ministry while the benefit is under Excise Law and, therefore, the benefit cannot be extended.
4. On a careful consideration of the submissions, we notice that the only ground taken by the Commissioner is that the credit earned in DEPB on exports made and adjusted towards duty payment in the Bill of Entry cannot be utilized for availing the Modvat Credit but only if it is paid through cash, it can be done. Ld. DR relied on the amendments made in the subsequent EXIM Policy 2002-07 wherein there is specific incorporation denying the benefit which cannot be considered for the period in question. We are of the considered opinion that this issue is no longer res integra and the findings recorded in the case of Polyhose India Pvt. Ltd v. CCE, Chennai (supra) would apply to the facts of this case. The findings recorded in para 6 of the noted judgment are extracted hereinbelow: 6. On a careful consideration of the submissions and on perusal of the record I find lot of force in the Ld. Consultant's submission.
Rule 57G lays down procedure for provision of availment of Modvat Credit in terms of the documents issued therein. One of the documents specified is Bill of Entry. In the present case there is no dispute that the Bill of Entry did carry the endorsement regarding the debit made in DEPB scheme towards CVD. The Revenue's contention is that mere debits in DEPB pass book is not sufficient but there should have been cash payment reflected in the said pass book. The Revenue is oblivious of the fact that the total result of the debit in DEPB pass book is as good as cash payment. The appellant does not get the benefit to the extent to which there is a debit under DEPB scheme towards CVD. The Revenue is in fact receiving the CVD duty on debit made in the DEPB scheme pass book.
Therefore, the Bill of Entry endorsement reflecting the payment towards CVD and Bill of Entry being a specified document under Rule 57G, appellants are entitled to avail Modvat Credit. The purpose of giving Modvat Credit is to avoid cascading effect hence so long as CVD has been paid either in the form of cash or though (Sic through) debit entries, the assessee is entitled for the benefit of Modvat Credit. The Revenue's stand is too technical and I do not see any substance in the Revenue's stand; Even, the Commissioner (Appeals) has recorded in Para 7 that there is room for difference of opinion and on that account he has set aside the penalty. In my opinion availment of Modvat Credit is required to be granted and hence the impugned order is set aside by allowing the appeal, with consequential relief, if any.
5. Respectfully following, the ratio thereof, the impugned order is set aside and appeal allowed with consequential relief, if any, as per law.