2010 (2) TMI 1036 - AT - Central Excise

Summary

Issues:
Appeal against Commissioner (Appeals) order - Deemed Modvat credit eligibility under Notification No. 58/97-C.E.(N.T.) - Discharge of duty liability under Compounded Levy Scheme - Jurisdictional authority's role in determining duty liability.

Analysis:
The case involved two appeals by the Department against the order of the Commissioner (Appeals) regarding the eligibility of M/s. Vishal Conduit Industries for Deemed Modvat credit under Notification No. 58/97-C.E.(N.T.). M/s. Prince Agro & Allied Industries, working under Compounded Levy Scheme, supplied M.S. Flats/Bars to M/s. Vishal Conduit Industries. The dispute arose when the jurisdictional Central Excise Authorities of the recipient unit questioned the duty liability discharged by the supplying unit and denied Deemed credit, leading to a demand of Rs. 57,122/- against M/s. Vishal Conduit Industries and penalties imposed on both units. The Commissioner (Appeals) set aside the Original Authority's order, prompting the Department's appeal.

The Department argued that the Commissioner (Appeals) relied on a High Court decision pending in the Supreme Court, emphasizing the duty payment declaration discrepancy in the invoices. It was acknowledged that the supplying and recipient units fell under different Commissionerates. However, the Tribunal noted that under the Compounded Levy Scheme, duty liability was not discharged invoice-wise but through compounded levy determined by the jurisdictional Commissioner, with Deemed credit facilitated by Notification No. 58/97-C.E.(N.T.) under Rule 57A of the Central Excise Rules, 1944. The Tribunal clarified that the jurisdictional officer of the recipient unit cannot question the correctness of duty liability of the supplying unit, as each unit's duty payment was subject to its Commissioner's assessment. Initiating proceedings for duty recovery should be done by the officer in charge of the supplying unit, with appellate remedies available. The Tribunal highlighted that challenging duty liability at the recipient's end could lead to chaos and was not legally permissible.

Consequently, the Tribunal upheld the Commissioner (Appeals) decision, ruling that M/s. Vishal Conduit Industries was eligible for Deemed credit, and no penalties were warranted for either party. The Department's appeals were dismissed, affirming the Commissioner (Appeals) order.