2008 (1) TMI 341 - HC - Central Excise

Whether deemed credit is available to the respondents where as per the Revenue, a manufacturer of inputs has not paid appropriate duty allegation of violation of the provisions of Rule 57A(6) read with Notification No.58/97- issue has been settled by the decisions of Punjab & Haryana High Court in the case of Vikas Pipes & Plasto Bombay Engineers - in view of that it is held that respondent is entitled for deemed credit

Issues:
1. Entitlement to deemed credit under Notification 58/97-CE when the manufacturer-supplier of inputs has not paid Central Excise duty.
2. Admissibility of deemed modvat credit on the strength of invoices from various manufacturers.
3. Violation of provisions of Rule 57A(6) of the Central Excise Rules, 1944.
4. Disallowance of modvat credit, recovery of amount, interest, and penalty.
5. Appeal against the order of the Commissioner (Appeals) and subsequent orders.
6. Interpretation of provisions of Notification 58/97-CE and relevant case laws.
7. Dismissal of the appeal by CESTAT and subsequent appeal by the Department.

Analysis:

Issue 1: Entitlement to deemed credit under Notification 58/97-CE
The primary issue in this case revolves around the entitlement of the manufacturer of final products to deemed credit under Notification 58/97-CE when the manufacturer-supplier of inputs has not paid Central Excise duty. The appellant argued that the assessee availed deemed modvat credit in violation of Rule 57A(6) of the Central Excise Rules, 1944. The dispute arose from the non-discharge of full duty liability by the manufacturer of inputs, leading to the disallowance of modvat credit and subsequent recovery notices issued by the adjudicating authority.

Issue 2: Admissibility of deemed modvat credit
The respondent, engaged in the manufacture of excisable products, availed deemed modvat credit based on invoices totaling Rs.4,29,760/- from various manufacturers. The Commissioner (Appeals) allowed the appeal of the assessee, citing relevant provisions of Notification 58/97-CE and the decision in Vikas Pipe case. The Commissioner emphasized the receipt of inputs directly from the factory of manufacturers and the necessary declaration about duty payment on the invoices, supporting the admissibility of deemed modvat credit.

Issue 3: Violation of Central Excise Rules
The appellant contended that the assessee violated Rule 57A(6) of the Central Excise Rules, 1944 by availing modvat credit despite the manufacturer of inputs not discharging full duty liability. This violation led to the imposition of penalties and recovery orders by the adjudicating authority, which were subsequently challenged by the assessee through appeals.

Issue 4: Disallowance of modvat credit and appeals
The adjudicating authority disallowed the modvat credit availed by the assessee, leading to an appeal before the Commissioner (Appeals). The Commissioner, following the decision in Vikas Pipe case, allowed the appeal of the assessee, setting aside the original orders disallowing the modvat credit. Subsequent appeals by the Department to CESTAT and the High Court focused on the interpretation of relevant provisions and case laws regarding the admissibility of deemed credit.

Issue 5: Interpretation of Notification 58/97-CE and case laws
The interpretation of Notification 58/97-CE and relevant case laws, particularly the Vikas Pipe case, played a crucial role in determining the entitlement to deemed credit. The decisions by the Commissioner (Appeals), CESTAT, and the High Court highlighted the importance of compliance with the notification requirements and the absence of explicit evidence requirements for the assessee to claim modvat benefit.

Issue 6: Dismissal of the appeal by CESTAT
CESTAT dismissed the Department's appeal, citing precedents from the Punjab & Haryana High Court in favor of the respondents' entitlement to deemed credit even when the input manufacturer had not paid appropriate duty. The dismissal of the appeal by CESTAT led to the instant appeal filed by the Department, challenging the decision based on the interpretation of legal provisions and previous judgments.

In conclusion, the judgment delves into the intricate details of excise duty liability, modvat credit entitlement, compliance with Central Excise Rules, and the interpretation of relevant notifications and case laws to determine the admissibility of deemed credit for manufacturers. The decision-making process by the adjudicating authorities, appellate bodies, and higher courts reflects a thorough analysis of legal provisions and precedents to resolve the dispute regarding the entitlement to modvat credit under Notification 58/97-CE.

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