ORDER
K.S. Venkataramani, Member (T)
1. E/Stay/135/89. – This is an application for dispensing with the pre-deposit of irregularly availed MODVAT credit by the applicants herein as ordered by the Assistant Collector of Central Excise, Madras VII Division, in his order dated 22-3-1988 as modified by the Collector (Appeals),’ Madras, in the impugned order dated 26-9-1988.
2. On hearing Shri Vijayaraghavan, the learned Consultant for the applicant and Shri K.K. Bhatia, the learned S.D.R., it is seen that the appeal itself lies in a short compass and is to be taken up for disposal today and accordingly the requirement of pre-deposit is dispensed with.
3. A. No. E/49/89. – The appellants herein gave a declaration for inputs for the purpose of availing MODVAT credit thereon as required under Rule 57G of the Central Excise Rules, 1944. The MOD VAT facility is available both for inputs on which Central Excise duty is paid as well as on imported inputs on which Customs Duty has been paid in terms of Rule 57-A of the Central Excise Rules, 1944. This includes additional Customs Duty (Countervailing duty) levied under Section 3 of the Customs Tariff Act, 1975. The appellants imported component parts like Potentiometers, switches, special screws, etc. which were cleared by them on payment of Customs Duty and Additional Duty of Customs (countervailing duty). These inputs are admittedly notified for the purposes of MODVAT credit. The appellants took credit of the countervailing duty paid on the imported inputs on the basis of the Bill of Entry indicating payment of the Duty thereon. Show Cause Notice was issued to them on 24-2-1987 as to why the, amount of credit of Rs. 2,31,426.45 should not be disallowed as the same was taken wrongly because the inputs, Potentiometers, Printed Circuit Boards and Switches were exempted from payment of Excise Duty under Notification No. 74/85, dated 17-3-1985. The Department’s case was that this would mean that countervailing duty was also exempted and hence it should not have been paid by the appellants. The credit was, therefore, sought to be denied on the ground that the Additional Duty of Customs (Countervailing duty) on the inputs should not have been paid by the appellants in view of the exemption available under the Central Excise Tariff on these inputs. The Assistant Collector in the adjudication order which followed duly confirmed the reversal of the credit. The Collector (Appeals) while dealing with the appeal against the Assistant Collector’s order held that recovery of the credit utilised by the appellants from April/July 1987 was time-barred and at the same time gave a finding that the appellants could not take credit of the countervailing duty paid because it was not duty leviable or duty at all in view of the…under. Central Excise Tariff.
5. Shri Vijayaraghavan, the learned Consultant appearing for the appellants contended that the Collector (Appeals) was in error because he has not appreciated the provision of Section 3 of the Customs Tariff Act, 1975 according to which any article which is imported into India shall in addition be liable to a duty equal to the Excise Duty for the time being leviable on a like article if produced or manufactured in India. Therefore, the Collector of Central Excise is wrong in holding that additional duty under Section 3 of the Customs Tariff Act, 1975 as a duty leviable under Central Excises & Salt Act, 1944, and also his finding that exemption under the Central Excise Tariff Act would automatically be applicable to the imported goods is also mis-conceived, according to the learned Consultant.
6. Heard Shri K.K. Bhatia, the learned S.D.R.
7. On a careful consideration of the submissions made by the learned Consultant and the learned S.D.R., we find a lot of force in the arguments put forth by the learned Consultant. Rule 57-A clearly provides for the availment for MODVAT credit of the Additional Duty of Customs (countervailing duty) paid on the inputs used in the manufacture of the finished products. It is not .disputed in this case that the Customs House assessed the imported inputs to additional duty of Customs and no exemption was granted, and it is also not disputed that the inputs are notified for the purposes of MOD VAT. The Bills of Entry showing duty payment was also available long with the inputs on receipt into the factory. These have also been duly declared by the appellants which had been acknowledged by the Department. In these circumstances to say that because the goods were exempted under Central Excise Notification issued under Rule 8(1) of the Central Excise Rules, 1944 no duty should have been paid by the appellants on the inputs at the time of import by way of countervailing duty, is totally mis-conceived and is not in accord with the provisions of Rule 57-A and also it is well settled principle that what is collected under Section 3 of the Customs Tariff Act, 1975 is in the nature of Customs Duty only and it is only for the quantification of the duty leviable under that Section the Central Excise Tariff has to be referred to. In this connection the Supreme Court decision in the case of Khandelwal Metal and Engineering Works and Anr. v. Union of India and Ors. [1985 (20) E.L.T. 222 (SC)] would be relevant wherein the Court held that the Additional duty under Section 3 of the Customs Tariff Act is in the nature of Customs Duty only. It cannot also be argued that just because there is an Exemption Notification under Central Excise Tariff, it will automatically be applicable to imported goods which will be classifiable under the relevant Central Excise Tariff Act Heading, because some of these Exemption Notifications are of a conditional nature. Therefore, we see a lot of force in the arguments put forth by the appellants which are accepted and the impugned order is accordingly set aside and the appeal allowed.