CEA No.132 of 2006 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CEA No.132 of 2006 DATE OF DECISION: February 1, 2010 MODERN STEELS LTD., MANDI GOBINDGARH ...APPELLANT VERSUS THE DEPUTY COMMISSIONER, CENTRAL ...RESPONDENTS EXCISE COMMISSIONERATE-I, CHANDIGARH & OTHERS CORAM: HON'BLE MR. JUSTICE ASHUTOSH MOHUNTA. HON'BLE MR. JUSTICE MEHINDER SINGH SULLAR. PRESENT: MR. O.P. GOEL, SR. ADVOCATE WITH MR. VARUN SHARMA, ADVOCATE FOR THE APPELLANT. MR. GURPREET SINGH, SR. STANDING COUNSEL FOR THE RESPONDENT. ASHUTOSH MOHUNTA, J.(ORAL) The appellant has impugned the order (Annexure A-9) passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (for short 'the Tribunal') dated 15.12.2005, vide which the MODVAT credit claimed by the appellant has been disallowed and the appeal filed by the Revenue was accepted by setting aside the order passed by the Commissioner. The following substantial question of law arises in the present appeal:- “Whether the Appellate Tribunal is justified in denying the modvat credit when the imported metal scrap has been cleared on the strength of out of custom charge gate passes by the clearing agent and duly authenticated by the seal of Commissioner of Customs Kandla Port in piecemeal and as CEA No.132 of 2006 -2- such the material reached the factory on 20.8.1996 and 7.11.1996 and the modvat credit was taken on 21.8.1976 and 7.11.1996?” The appellant-Company is a manufacturer of iron and steel products falling under Chapter 72. It imported approximately 550 MTs of metal scrap through Kandla Port and filed a Bill of Entry for clearance of the same on 12.1.1996, and paid duty on 20.1.1996. The appellant-company received different quantities of metal scrap assessed in the Bill of Entry No.378 dated 12.1.1996, on 21.8.1996 and 7.11.1996. The clearance certificate in this regard has been attached as Annexure A-7 in which the details have been given:- CLEARANCE CERTIFICATE REF:- TF(A)WB/96-97/7232 dt. 13-11-1996 IN CONNECTION WITH THE REFERRED WEIGHMENT CERTIFICATE, THIS IS TO CERTIFY THAT M/S A.V.JOSHI & CO. A/C. M/S MODERN STEEL HAVE CLEARED THE IMPORT CARGO I.E. HEAVY MELTING SCRAP IN BULK DURING FEBRUARY'1996 AND MARCH'1996 LANDED OVER PER EX. MV KAPLTAN-K VIDE B.E. NO.F-378 DATED 12/01/1996. B.L. QUANTITY 550.000 MT. CLEARANCE DURING FEBRUARY'1996 AND MARCH'1996 448.795 AND LATER CLEARANCE AS MENTIONED BELOW. Sr.No. P.G.P. No. DATE OF CLEARANCE CLEARANCE IN MT February & March 96 448.795 1 13008 16-08-1996 17.660 2 13009 16-08-1996 15.260 CEA No.132 of 2006 -3- Sr.No. P.G.P. No. DATE OF CLEARANCE CLEARANCE IN MT 3 13010 16-08-1996 15.775 4 13011 16-08-1996 17.220 5 13012 16-08-1996 17.615 6 14176 12-09-1996 12.175 Up to date clearance 544.500 MT The high quality metal scrap was despatched from Kandla Port on 16.8.1996 after clearance and were received in the factory premises of the appellant on 20.8.1996 and 18.9.1996. The MODVAT credit was claimed on 21.8.1996 and 7.11.1996. The adjudicating authority disallowed the credit to the appellant and also imposed penalty of Rs.10,000/- under Rule 173Q(bb) of the Central Excise Rules, 1944. The appellant filed appeal which was allowed by the Commissioner vide order dated 11.9.1993, Annexure A-4 and vide said order, MODVAT credit was allowed. The Revenue filed an appeal before the Tribunal, which set aside the order passed by the Commissioner and has disallowed the MODVAT credit, as claimed by the appellant, vide order Annexure A-9. It is this order which has been impugned before us. Counsel for the appellant submits that imported metal scrap was received at Kandla Port and they filed a Bill of Entry of clearance of the same on 12.1.1996, and also paid the duty thereon on 20.1.1996. The goods were despatched from the Kandla Port Authority on 16.8.1996 and 12.9.1996, respectively which reached the factory premises of the appellant on 20.8.1996 and 18.9.1996 and MODVAT credit was claimed on 21.8.1996 and 7.11.1996. It is contended that there was no delay on part of the appellant in claiming the MODVAT credit and that the Tribunal has CEA No.132 of 2006 -4- gravely erred in disallowing the same by holding that MODVAT credit has been claimed 6 months after the date of Bill of Entry. Counsel for the appellant submits that MODVAT credit could be claimed only after the metal scrap was received in the factory premises of the appellant and hence the same was claimed within 6 months of the goods reaching the factory premises. Counsel for the appellant has placed reliance on M/s Phoenix Industries Ltd. Vs. Commissioner, Central Excise, Meerut, 2001(131) ELT 82, wherein it has been held that credit has to be taken only when goods are received in the factory after release from custody of custodian Airport Authority. The date of clearance of goods from Airport Authority is to be taken as relevant date and MODVAT credit is proper having been taken within 6 months from the relevant date. On the other hand, Mr. Gurpreet Singh, counsel for the Revenue has vehemently argued that as the goods had been assessed to Customs Duty on 20.1.1996, and the MODVAT credit was claimed on 21.8.1996, and 7.11.1996, i.e. beyond the period of 6 months, therefore, no MODVAT credit is allowable to the appellant. Learned counsel submits that in the present case the appellant was not entitled to any MODVAT credit in view of Rule 57G(3) and Rule 57G(5) of The Central Excise Rules, 1944. We have heard the counsel for the parties at length. In the present case, it is not in dispute that the metal scrap had reached the Kandla Port on 12.1.1996 and duty was paid on 20.1.1996, however, the release of the goods is subject to clearance by the Port Authorities. In the present case, nothing has been shown by the Revenue that the assessee was at fault in not getting the goods cleared, specially, when he had paid the duty. The CEA No.132 of 2006 -5- goods had reached the factory premises of the appellant on 20.8.1996 and 18.9.1996, respectively. No loss has been caused to the Revenue as the entire duty was paid and against which MODVAT credit has been rightfully claimed by the appellant. In the present case, the period of 6 months is to be computed from the date of clearance of goods by the Kandla Port Authorities as has been held in Phoenix Industries Ltd.'s case (supra). Apart from the above, the appellant also imported similar quality of metal scrap on which the MODVAT credit had been allowed, despite the fact that the goods had reached its premises after a period of 6 months and no appeal was filed by the Revenue against the order (Annexure A-6) dated 10.4.2000, passed by the Commissioner (A), Customs and Central Excise , Chandigarh. Resultantly, as the MODVAT credit had been claimed by the appellant within a period of 6 months from the date when the metal scrap reached the factory premises of the appellant, hence the Revenue could not disallow the claim of MODVAT credit to the appellant. It is held that the Tribunal was not justified in denying MODVAT credit when the claim had been made within six months of the material reaching the factory premises. The question posed is answered in favour of the appellant and against the Revenue. In view of the above, the impugned order (Annexure A-9) dated 15.12.2005, passed by the Tribunal is not sustainable and the same is set aside and the order passed by the Commissioner (Annexure A-4) is maintained. Consequently, the appeal is allowed. (ASHUTOSH MOHUNTA) JUDGE February 1, 2010 (MEHINDER SINGH SULLAR) Gulati JUDGE