2010 (5) TMI 725 - AT - Central Excise

Summary

Issues: Challenge to denial of modvat credit by Commissioner (Appeals)

Analysis:
The main challenge in this case pertains to the denial of modvat credit by the Commissioner (Appeals) based on the finding that no differential duty is demandable from the supplier of the inputs, hence the modvat credit of Rs. 11,40,037/- is not admissible to the appellants. The appellants argue that they had a valid duty paying document and the duty was collected by the Department at the supplier's end, thus their right to claim modvat credit should not have been denied. They contend that since the Department has not refunded the duty amount to the suppliers, the denial of modvat credit to the appellants is unwarranted. The appellants stress that they had discharged their duty burden and the duty was collected by the Department, so their right to claim modvat credit should not have been extinguished.

Legal Principles:
The law states that a manufacturer can avail modvat credit only to the extent of the duty paid on the inputs purchased. If the inputs were not subjected to duty payment, the manufacturer cannot claim modvat credit. In this case, since the authorities found that the supplier of the inputs did not pay duty, the appellants cannot seek modvat credit for those inputs. Even if the supplier paid duty wrongly, the right to seek a refund lies with the supplier, not with the appellants who procured duty-free inputs. The contention raised by the respondents aligns with established legal principles, indicating that the impugned order denying modvat credit to the appellants is justified.

Conclusion:
After careful consideration, the Appellate Tribunal upholds the decision of the Commissioner (Appeals) to deny modvat credit to the appellants. The Tribunal finds no fault in the impugned order and dismisses the appeal accordingly. The judgment emphasizes that the appellants cannot claim modvat credit for duty-free inputs procured from a supplier who did not pay duty, reiterating the principle that modvat credit is linked to the duty paid on inputs.