2011 (1) TMI 73 - HC - Central Excise

Cenvat credit Assessee purchases inputs from different manufacturers and utilizes modvat credit on the basis of the invoice supplied by them in which an endorsement made that liability of the excise duty has been cleared off by the manufacturer - one of the manufacturers had not discharged its excise duty - adjudicating officer disallowed the credit utilized - Assessee had claimed the modvat credit in view of the notification no.58/97-CE Rules - conditions are as follows The Assessee should have received the inputs directly from its manufacturer; and The invoices should have endorsement that the excise duty has been duly paid - no dispute that the inputs were received directly from its manufacturers and the invoices contained necessary endorsement - No substantial question has arisen in the appeals - Tribunal rightly dismissed the appeals of the Department

Summary

Issues:
1. Disallowance of modvat credit by the Adjudicating Officer for excise duty not cleared by manufacturer.
2. Appeals filed by Assessee and Department against different orders of the Adjudicating Officer.
3. Commissioner (Appeals) decision to allow Assessee's appeal for one period and dismiss Department's appeal for another.
4. Tribunal's dismissal of appeals leading to further appeals before the High Court.

Analysis:
1. The Assessee, engaged in manufacturing iron & steel products, utilized modvat credit based on invoices from manufacturers indicating excise duty clearance. However, a report revealed one manufacturer did not clear excise duty, leading to show cause notices for different periods.

2. While the Adjudicating Officer disallowed credit for one period, proceedings were dropped for another. Subsequently, the Assessee and Department filed appeals against these decisions, resulting in separate orders by the Commissioner (Appeals).

3. The Commissioner allowed the Assessee's appeal for one period and dismissed the Department's appeal for the other. This led to further appeals before the Tribunal, which ultimately dismissed both appeals, prompting the present appeals before the High Court.

4. The High Court examined the conditions under the relevant notification for claiming modvat credit, emphasizing the requirement of direct receipt of inputs from manufacturers with proper endorsement of excise duty payment on invoices. It was noted that the Assessee complied with these conditions, and no evidence suggested the Assessee's involvement in incorrect endorsements.

5. The Court highlighted the Department's obligation to take action against manufacturers for non-payment of duty or incorrect endorsements, rather than attributing liability to the Assessee without justification. Consequently, the Tribunal's decision to dismiss the appeals was upheld, with the Court emphasizing the absence of substantial legal questions and merit in the appeals.

6. The judgment concluded by affirming the dismissal of both appeals and signaling the Department's recourse to pursue appropriate actions against non-compliant manufacturers, underscoring the Assessee's adherence to prescribed conditions for claiming modvat credit.