BE A LITTLE MORE CAREFUL, AFTER ALL MODVAT IS MONEY

By

K.Vijay Kumar, M.A.,B.Ed., B.L.,

SUPERINTENDENT OF CENTRAL EXCISE

 

Modvat as well known is instant credit and is as good as money; then doesn't it deserve a little more respect and a little more care? After all no other tax department in India gives this kind of benefit with so little strings. In any case who will give you money, even your own money without proper verification and a few hassles? A banker refuses to pay the cash if the cheque

 

1. is not properly signed
   
2. is more than six months old
   
3. does not carry full signatures in corrections
   
4. is mutilated
   
5. does not mention the drawee's particulars correctly
   

 

and even then it is paid only after verification and on payment of collection Charges. Even a draft issued by the bank itself cannot be encashed if there are some mistakes in the draft (committed by the banker). Even when a banker credits a cheque or draft in your account, the moment any discrepancy is detected, the amount is immediately debited from your account, without even the courtesy of informing you. My bank dishonored a cheque issued by me to LIC, because a correction in date did not carry my full signature. The Bank did not inform me of this, but LIC refused tok accept a cheque from me again and demanded interest from me.

 

 

But in the case of Modvat everything chalega. Modvat rules require

1. A declaration has to be filed with the Assistant Commissioner with certain particulars and dated acknowledgement obtained
   
2. The goods should be received under the cover of an invoice
   
3. The invoice should have a serial numbered and some other printed particulars and should be marked Duplicate', should show the full postal address of the Range, should show the particulars of the product, duty payment etc.
   
4. Certain accounts are to be maintained and returns furnished.
   

 

Most of them, quite simple and practically possible. But then full compliance is not required. Higher appellate forums have time and again decided that substantial compliance is enough and that a substantial benefit cannot be denied because of procedural irregularities. What then is substantial compliance ? Are adjudicating authorities (especially the lower level ones) competent to grant these benefits?

 

Various authorities have held that :

 

1. Declaration filed with Superintendent is valid
   
2. Declaration on the back of the Classification List is good enough
   
3. Variations in tariff headings do not matter
   
4. The invoice need not accompany the goods, it can come later.
   
5. Failure in good faith is condonable and credit should not be disallowed merely on account of non-filing of declaration.
   
6. Duty paying documents need not exactly conform to rules.
   

 

The concept now is that credit should not be denied

 

1. if the duty paid nature of the goods is not in dispute
   
2. if the goods are eligible for Modvat and
   
3. they have been received into the factory
   

 

They why so many rules ? And can original adjudicating authorities allow credit based on the above-mentioned grounds, ignoring the rules? Or is the rule that credit will be allowed provided you go to CEGAT and above? Is this a racket by those interested in prolonged litigation.

 

As pointed out by a colleague, Mr.Pradyumna GH in the 15 November ELT there may be the case of a dealer passing on credit, which he was not entitled to pass on. Here the recipient factory, which gets the Modvat invoice from the dealer, gets perfectly valid document on which he gets credit. So here the dealer can pas n a better title than what he possessed! Incredible, but true. In one case, a dealer received goods under original copies of the invoices; he passed on the duty on duplicate copies to a manufacturer who took the credit. The department sought to deny credit on the ground that even the dealer (had he been a manufacturer) would not have been eligible for credit on the original invoice and so he can not pass on a better title. Tribunal said the department did not conduct any investigation on what happened to the Duplicate copy of the invoice.

• If I board a different train than the one for which I hold reservation, I am deemed to be a ticket-less traveler and liable for punishment.
  
• If I don't carry the original driving licence, while driving on the road, I am penalized
  
• If I apply for a ration card to a wrong authority I am never given one (even with the right authority, I am not sure of getting it).
  
• If I don't produce an original Date of Birth Certificate, my child can not apply for a seat in a street corner school.
  
• But if I want to take Modvat though there are elaborate rules, I don't need to worry too much, ultimately, I will get my credit.
  

    Comparisons are odious, they say and some assesses have told me that you can not compare Modvat with bank cheques, because there money is not ultimately denied and it is paid after rectifying the mistakes, but here at the slightest provocation Central Excise Officers proceed to deny credit. True. But we are not in the business of banking and we are not in a service sector, we are in the unfortunate, unwelcome job of collecting taxes. Anyway the latest trend in Modvat is that for any rectifiable mistake Modvat can not be denied.

    But Modvat is money and instant money at that and there are rules. Should we not give it a little more respect and a little more care? EXCISE LAW TIMES – 01.02. 1999 – A 131