2007 (1) TMI 332 - AT - Central Excise

Summary

Issues:
Eligibility of Modvat credit for duty paid stocks received from units working at compounded rates till 31-3-2000.

Analysis:
The appellant, engaged in manufacturing hot re-rolled products of non-alloy steel, received M.S. ingots from a supplier for its manufacturing process. The dispute arose regarding the eligibility of Modvat credit amounting to over Rs. 3 lakhs, related to two consignments of ingots received on specific dates. The appellant claimed credit equivalent to the duty paid by the supplier as mentioned in the invoices, in accordance with Notification 29 of 2000 (N.T.) dated 31 March 2000. This notification allowed credit @ 12% of the value of the goods for duty paid stocks received from units working at compounded rates till 31-3-2000, subject to certain conditions.

The impugned order denied part of the credit on the basis that the appellant did not take credit @ 12%, but equivalent to the actual duty paid amount. However, the appellant argued that the credit taken was less than the credit due @ 12% as per the notification, and all specified conditions were met, including direct purchase from the manufacturer and payment under cheques. The appellant also cited a previous Tribunal order in a similar case, decided in favor of the assessee, which was not followed by the Commissioner in the present case.

Upon review, the Tribunal found that the issue was already covered in favor of the assessee by the previous order, and the Commissioner erred in not following that decision. Additionally, it was emphasized that the credit available under the Cenvat rules is equivalent to the duty paid on inputs or capital goods, and in the case of compounded levy items, the credit was fixed at 12% of the value of the goods. The Tribunal acknowledged that the credit taken by the appellant was less than what was available under the notification, and clarified that an assessee cannot be penalized for taking a lesser amount of credit than entitled under the law.

Consequently, the Tribunal held that the impugned order was unsustainable, and it was set aside, allowing the appeal in favor of the appellant. The judgment was dictated and pronounced in open court.