2012 (3) TMI 169 - AT - Central Excise

Deemed Modvat credit on the inputs in terms of Notification No.58/97-CE, dtd. 30.08.97 - credit was availed by the appellants on the strength of invoices issued by supplier of inputs discharging their duty liability in terms of Section 3A of the Central Excise Act, 1944 read with Rule 96ZP(3) Central Excise Rule, 1944 (scheme commonly known as Compounded Levy Scheme) - credit was denied on the grounds that invoices did not declare that the appropriate duty of excise has been paid on the inputs under the provisions of Section 3A of the Act - Held that - inputs suppliers are working under the Compounded Levy Scheme who discharge their duty liability at the end of the month in which the goods stand cleared by the input supplier and duty liability in respect of each and every clearance was not being determined and reflected in the invoices - appeal allowed with consequential relief to the appellants to take input credit

Summary

Issues:
Denial of deemed Modvat credit on inputs due to supplier not discharging duty liability under Compounded Levy Scheme.

Analysis:
1. The appellants, engaged in manufacturing Steel Tubes & Pipes, availed deemed Modvat credit on inputs under a specific notification. The supplier, M/s Rathi Steels, was under the Compounded Levy Scheme, where duty liability was to be discharged at the end of the month.

2. Proceedings were initiated against the appellants for denying the credit based on the supplier not discharging duty. The demand of duty and penalty were confirmed by the authorities.

3. The Appellate Tribunal analyzed the relevant Notification allowing deemed Modvat credit. The issue revolved around whether the invoices declared the appropriate duty payment under Section 3A of the Central Excise Act.

4. The Commissioner(Appeals) observed discrepancies in the invoices regarding duty liability discharge. Some invoices stated duty discharged, while others indicated duty to be discharged. The jurisdictional Assistant Commissioner's report confirmed the supplier had not discharged duty liability.

5. The Commissioner denied the benefit based on the discrepancies in the invoices, even though the intention was to reject only specific invoices. The Tribunal referred to various decisions, emphasizing that credit cannot be denied to the input receiver based on the supplier's duty payment.

6. Previous Tribunal and High Court decisions highlighted that the supplier's declaration under the Compounded Levy Scheme is sufficient proof of duty discharge, allowing deemed Modvat credit to the input receiver.

7. The Tribunal noted that the Commissioner(Appeals) did not follow precedents where duty liability to be discharged did not equate to duty actually discharged, leading to credit denial.

8. The Tribunal emphasized that under the Compounded Levy Scheme, duty liability is cleared at the end of the month, and the supplier's declaration on invoices suffices for deemed Modvat credit eligibility.

9. The Tribunal overturned the appellate order, citing that the issue was covered by previous decisions, and there was no justification for denying the credit to the appellants. The appeal was allowed, providing consequential relief to the appellants.