LexMEWAR POLYTEX LTD. versus UNION OF INDIA AND ORS.
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A B [2010] 14 (ADDL.) S.C.R. 812 MEWAR POLYTEX LTD. v. UNION OF INDIA AND ORS. (Civil Appeal No. 10413 of 201.0) DECEMBER 9, 2010 [DR. MUKUNDAKAM SHARMA AND ANIL R. DAVE, JJ.] Central Excise Rules, 1944: r.57A - Modvat credit on C inputs -Advance Licencing Scheme - Declaration made by assessee on AR~4 Form that it was not availing the benefit of Modvat credit on inputs - Assessee, however, used indigenous inputs in the manufacture of export consignment and availed Modvat credit on the same - Exported finished D goods under the Advance Licencing Scheme without payment of duty - Reversal of credit and imposition of penalty by Revenue - Correctness of - Held: Correct - Entitlement to Modvat credit did not arise since no excise duty was incident upon the finished goods - Declarations under AR4 entitled E the assessee to import inputs on payment of the countervailing duty, which subsequently was permitted to be drawn back - The assessee not only availed of Modvat credit on the indigenous input, but also drew back countervailing duty paid on imported inputs that were mere stock replenishments F - This amounted to a double benefit - Tax/Taxation - Unjust enrichment. The assessee exported fabrics with a declaration on the AR4 that they were not availing the benefit of credit. The export was made by them under the Advance G Licencing Scheme against which they were entitled to receive replacement. However due to urgency of export order, they used indigenous inputs in the manufacture of the export consignment. Later on, when the replacement was received, they took modvat credit on the indigenous H 812 MEWAR POLYTEX LTD. v. UNION OF INDIAAND 813 ORS. inputs. They also availed the benefit of drawback as the A export was made by them under the drawback scheme. The question which arose for consideration in the instant appeal was whether the appellant-assessee was entitled to avail modvat credit on indigenous input. 8 Dismissing the appeal, the Court HELD: 1.1. A literal reading of the Rule 57 A of Central Excise Rules, 1944 makes it amply clear that an entitlement to Modvat credit will arise only if excise duty C is incident upon the final product. The final product in the instant case referred to the finished goods (PP fabrics) that were exported under the Advance Licensing Scheme without payment of duty. The declarations filed under AR4 entitled the assessee to import inputs on payment o of the CVD, which subsequently was permitted to be drawn back. Therefore, the assessee had utilized the specified mechanism to avail of a benefit on the imported inputs, while availing of Modvat credit on the indigenous raw material used in the manufacture of the exported goods. In effect, the assessee has not only availed of E Modvat credit on the indigenous input, but also drew back countervailing duty paid on imported inputs that were mere stock replenishments. This would amount to a double benefit. That the Modvat credit was technically claimed only subsequent to the filing of AR4 declarations, although the indigenous goods were used in the manufacturing process a priori does not also reflect well F on the intention of the assessee. The assessee has merely resorted to the technicality of claiming Modvat • credit subsequent to the AR4 declarations, thereby G entitling it to drawback. Subsequently, the Modvat credit has been availed on the very same indigenous goods, which shows that the claim of the assessee to be legitimately entitled to two separate duties was but a facade. [Para 15, 16] [820-D-H; 821-A-B] H 814 SUPREME COURT REPORTS (2010) 14 (ADDL.) S.C.R. A 1.2. There can be no question of separate duties arising in the instant case since the issue concerns the manufacture and export of one and the same goods. The imported inputs were primarily stock replenishments that were used in the execution of other orders, and allowing B the assessee to claim Modvat credit on the indigenous input would tantamount to giving a benefit twice for the same process that began with the manufacture and culminated in the export of the specified goods. The assessee cannot claim Modvat credit on finished goods c where duty is not incident. Any attempt to avail it subsequently, casts serious aspersions on the bonafide intention of the assessee. The argument of the assessee that action had to be taken under the Duties Drawback Rules, 1971 and not through reversal o
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