MODVAT credit and pre-notice duty payment: valid bill of entry copy and prior discharge barred denial and penalties.

MODVAT credit could not be denied merely because the importer used a triplicate bill of entry copy, as it was a genuine bill of entry copy and the requirement was only that a bill of entry exist; the denial was therefore unsustainable and was set aside. Penalties were also not sustainable where the duty attributable to erection, commissioning and installation charges had already been paid before issuance of the show cause notice, so the penal provisions were not warranted and the penalties were dropped. The appeals thus succeeded to the extent of restoration of credit and removal of penalties, with the remaining order left undisturbed.

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Issues: (i) whether MODVAT credit could be denied on the ground that the credit was taken on a triplicate bill of entry copy; (ii) whether penalties were sustainable when the duty attributable to erection, commissioning and installation charges had been paid before issuance of the show cause notice.

Issue (i): Whether MODVAT credit could be denied on the ground that the credit was taken on a triplicate bill of entry copy.

Analysis: The relevant customs practice left the original and duplicate bill of entry copies with the Customs House, while the importer retained the triplicate and quadruplicate copies. Since the document used for credit was a genuine bill of entry copy and the governing MODVAT requirement was only of a bill of entry, denial of credit on the ground that it was a carbon-imprinted copy was held to have no basis.

Conclusion: The denial of MODVAT credit was not sustainable and was set aside.

Issue (ii): Whether penalties were sustainable when the duty attributable to erection, commissioning and installation charges had been paid before issuance of the show cause notice.

Analysis: The duty found payable on account of erection, commissioning and installation charges had been discharged before the show cause notice. In that situation, invocation of the penal provisions was not warranted.

Conclusion: The penalties were not sustainable and were dropped.

Final Conclusion: The appeals succeeded to the extent of removal of the penalties and restoration of the MODVAT credit, while the order was otherwise left undisturbed.

Ratio Decidendi: Credit cannot be denied on a valid bill of entry copy merely because it is not the customs office copy, and penalty is unwarranted where the duty involved has already been paid before the show cause notice.

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