2012 (4) TMI 310 - HC - Central Excise

Assessee under compulsion began paying central excise duty on the Cable Jointing Kits though there is no manufacture of any excisable goods - assessee challenged the exibility and also claimed MODVAT credit on the inputs - Held that - the assessee is not a manufacturer of goods as held by this Court that the assessee was only assembling Cable Jointing Kits - availment of MODVAT credit at the relevant time was justified since it was compelled to pay central excise duty on Cable Jointing Kits - the assessee did not act in an illegal manner and for this reason the action taken under the show cause notice issued to the assessee was not justified.

Summary

Issues:
1. Whether the assessee is liable to pay central excise duty on Cable Jointing Kits.
2. Whether the assessee is entitled to claim MODVAT credit on inputs.
3. Whether denial of refund of MODVAT credit by the Revenue was justified.
4. Whether the Tribunal's decision on the MODVAT credit issue was correct.

Issue 1: Liability to Pay Central Excise Duty
The assessee, involved in assembling Cable Jointing Kits, contended that no manufacturing of excisable goods took place. However, the Revenue insisted on central excise duty payment. The Court previously ruled that no manufacturing was involved in assembling the kits, settling the issue.

Issue 2: Entitlement to MODVAT Credit
The assessee challenged the flexibility of central excise duty and claimed MODVAT credit on inputs. The Commissioner granted a refund through the profit and loss account but rejected the MODVAT credit refund, deeming it inadmissible. The Tribunal later allowed the appeal, emphasizing that denial of MODVAT credit should be through separate proceedings, not mixed with refund claims.

Issue 3: Justification of Denial of MODVAT Credit Refund
The Revenue issued a show cause notice to recover and deny MODVAT credit utilized by the assessee. The Tribunal found that the assessee was compelled to avail the credit due to Revenue's stance on the kits being excisable goods. It differentiated between amounts utilized and compelled actions, asserting that proceedings for denial of MODVAT credit refund should be separate.

Issue 4: Tribunal's Decision on MODVAT Credit
The Tribunal's decision was deemed correct by the Court. Rule 57C of the Central Excise Rules was cited, stating conditions for credit allowance. As the assessee was not a manufacturer but an assembler, the MODVAT credit availed was justified. The Court concluded that the show cause notice actions were unjustified, as the assessee acted legally at the time, dismissing the appeal.

In conclusion, the Court found no substantial legal question and dismissed the appeal, upholding the Tribunal's decision on the MODVAT credit issue.