2011 (8) TMI 821 - HC - Central Excise

Deemed credit under Notification 58/97 - Supplier of inputs has not paid Central Excise duty and given a wrong certificate about dischargement under Rule 96ZP - Held That - under Rule 57A(6) of the Central Excise Rules, 1944, the manufacturer covered by compuneded levy scheme, is deemed to have discharged its duty liability. - in case the annual capacity of production of input manufacturer because of dispute cannot be determined at the time of issue of invoice, the scheme of conveyance of deemed credit cannot be put on hold and the substantive benefit of deemed credit cannot be denied to the input purchaser. - Appeal of revenue was dismissed.

Summary

Issues:
Appeal under Section 35-G of the Central Excise Act, 1944 regarding entitlement to deemed credit under Notification 58/97-CE when the manufacturer-supplier of inputs fails to discharge duty liability and issues wrong certificate on invoices.

Analysis:
1. The appeal was filed by the revenue challenging the denial of Modvat Credit to the assessee based on invoices issued by the manufacturer under Compounded Levy Scheme. The revenue contended that the manufacturer of inputs failed to discharge duty liability, leading to the denial of Modvat Credit. The adjudicating authority disallowed the credit, creating a demand for interest and penalty. However, the appellate authority and Tribunal held that the deemed Modvat Credit could not be denied based on the manufacturer's failure to discharge duty liability, citing notification No. 58/97-CE dated 30.8.1997.

2. The issue raised in the appeal was related to whether a manufacturer covered by the compounded levy scheme could seek redetermination of its capacity below the originally assessed capacity. The appellate authority determined that under Rule 57A(6) of the Central Excise Rules, a manufacturer covered by the compounded levy scheme is deemed to have discharged its duty liability, allowing the deemed Modvat Credit. The invoices from the manufacturer declared the duty liability to be discharged under Rule 96ZP(3), and the appellants availed deemed credit based on these statutory invoices.

3. The judgment referenced a case where CEGAT held deemed credit admissible when there was compliance with the substantive requirements of notification no. 58/97 dated 30-08-97. Additionally, it was noted that if the annual capacity of production of the input manufacturer cannot be determined at the time of issuing invoices due to a dispute, the substantive benefit of deemed credit cannot be denied to the input purchaser. Similar views were upheld in previous judgments, providing precedent for allowing deemed credit in such cases.

4. The judgment concluded that the question of law raised in the appeal was covered against the revenue, indicating that there was no merit in the appeal. Therefore, the appeal was dismissed based on the findings and precedents cited in the detailed analysis of the issues involved.