2013 (3) TMI 502 - HC - Central Excise

Deemed credit in terms of Notification No. 58/97 dated August 30, 1997 - claim of Modvat credit disallowed - Whether credit admissible to the inputs user on the basis of Invoice on which appropriate duty has not been paid by the input suppliers u/s 3A r.e.r. 96ZP(3) of the Central Excise Rules, 1944? - Held that - Though it is not in dispute that the manufacturer from whom the respondent-assessee had purchased the inputs had paid only a part of the duty under the compounded scheme and was disputing its liability to pay the balance amount, but that would not come in the way of the respondent-assessee claiming the benefit of the Modvat credit in view of the notification dated 30-8-1997. Admittedly, part of the amount of the compounded levy has been paid and it cannot be ascertained as to whether it related to the invoice in respect of which the respondent-assessee had claimed the Modvat Credit or not. Thus the Tribunal had rightly decided the claim in favour of the assessee.

Summary

Issues:
Admissibility of deemed credit under Notification No. 58/97 for inputs with unpaid appropriate duty.

Analysis:
The appeal was filed under Section 35G of the Central Excise Act, challenging an order regarding the admissibility of deemed credit under Notification No. 58/97. The respondent, a private limited company engaged in manufacturing chains, availed Modvat Credit during 1998-99. The Superintendent found discrepancies in the Modvat Credit amounting to Rs. 24,664 against invoices where appropriate duty declaration was missing. A show cause notice was issued, leading to confirmation of demand and imposition of penalty by the Deputy Commissioner. The Commissioner (Appeals) upheld the decision, which was later challenged and allowed by the Tribunal in 2004.

The Department argued that the Tribunal erred in allowing the Modvat credit claim as the declaration did not comply with the requirements of the notification. It was highlighted that the manufacturer had not fully paid the duty under the compounded scheme. However, the Court noted that the respondent could still claim the Modvat credit despite the manufacturer's partial payment, as per the notification. The Court observed that since part of the compounded levy amount was paid, it was unclear if it pertained to the specific invoice in question for the Modvat Credit.

Consequently, the Court upheld the Tribunal's decision in favor of the respondent, stating that the respondent could avail the Modvat credit even if the manufacturer had not fully discharged its liability. The Court found no legal flaw in the Tribunal's order and dismissed the appeal.