Per Moheeb Ali : The appellant exported a consignment of Chloro Benzene Compound falling under Chapter Sub-heading 29.21 of CETA manufactured by them. The buyer abroad rejected the consignments. The appellant sought permission to reimport the consignment and to take the goods into their registered premises for remaking, repairing etc. Such permission was granted subject to the condition that the appellant shall not take credit of CVD paid. Thereupon the appellant imported and cleared the said goods under two Bills of Entry. At the time of import they paid CVD applicable. The total CVD paid is Rs. 2,32,401/-. The appellant took credit of CVD paid in their RG 23A Pt.II on the strength of the Bills of Entry under which CVD was paid. Reprocessed the said goods and cleared them again on payment of appropriate duty.

2. The Department denied the credit so taken on two grounds. (a) Permission to reprocess the goods was given on the specific condition that the appellant shall not take credit of CVD paid and (b) the appellant while bringing back the goods for reprocessing has not filed a declaration under Rule 57G which calls for such declaration.

3. The Commissioner (A) in the impugned order upheld the order of the lower authority who denied the credit taken and imposed an equal amount of penalty under Rule 57I.

4. Heard both sides.

5. It was argued that the appellant had correctly taken credit of CVD paid at the time of import. The scheme provides for such availment of credit. The Assistant Commissioner order stating that the reprocessing of rejected goods is allowed with a specific condition that credit of CVD shall not be taken is not in accordance with law; that Rule 173-MM and Rule 97B do not say that credit cannot be taken; that denial of credit on the ground that declaration under Rule 57G is not filed in the present case is not justified; that in similar cases credit of CVD paid is allowed; that imposition of penalty is not called for as nothing was suppressed by them with an intent to evade duty.

6. The Ld. DR strongly supported the order of the Commissioner (Appeals). The appellant's did not file a declaration under Rule 57G before taking credit. This itself is enough to deny credit. The appellant also did not abide by the condition under which permission was granted.

7. The Commissioner (A) appears to have confirmed the lower authority's order on the ground that the appellant before him 'defied' the orders of the authority, who while giving permission to reimport, and bring back the defective goods to the factory specifically indicated that the appellant shall not take MODVAT credit of CVD paid at the time of import. I do not know which provision of MODVAT Scheme permits the authority to impose such conditions. A substantive benefit available under MODVAT Scheme is sought to be denied while accordingly permission to reimport the goods for reprocessing them for further export. In regard to non-filing of declaration under Rule 57G. I observe that the Department is well aware that reimported goods are being brought for reprocessing as they themselves gave permission to do so albeit with a condition that credit would not be taken. This plea of the department seemed to have been taken only to deny the credit which is otherwise admissible.

8. I am also informed that the appellant paid duty on the goods while clearing them again for export. Neither the reversal of credit nor penalty imposed is justified.

9. The appeal is allowed, the order of the Commissioner is set aside.