2017 (1) TMI 216 - AT - Central Excise

MODVAT credit - credit to the extent of 50% - denial on the ground that the supplier M/s. Fiat India Ltd. at the time of removal of capital goods that is Dies and Moulds paid 50% excise duty and remaining 50% was paid belatedly that is after supply of the capital goods and also after availing cenvat credit by the appellant - Held that - M/s. Fiat India Ltd. at the time of removal of capital goods that is Dies and Moulds paid 50% excise duty and remaining 50% was paid belatedly that is after supply of the capital goods and also after availing cenvat credit by the appellant In the present case as of now whatsoever short payment of duty i.e. 50% of the total duty was alleged has now been paid by the supplier which has been recorded by the lower authority in their orders. For this particular reason as of today there is no issue of wrong availment of modvat credit particularly on the ground that the duty was not correctly paid by the supplier. Credit allowed - appeal allowed - decided in favor of assessee.

Summary

Issues:
- Availment of Cenvat Credit on capital goods
- Discrepancy in duty payment by the supplier
- Denial of credit by the Revenue
- Appeal challenging demand of interest

Availment of Cenvat Credit on Capital Goods:
The appellant availed Cenvat Credit on capital goods, with 50% paid at the time of receipt and the remaining 50% in the subsequent financial year. The credit was based on an invoice from the supplier, who paid 50% excise duty at the time of goods removal and the rest belatedly. The department contended that the appellant wasn't entitled to the Credit for the unpaid 50% at clearance. The adjudicating authority dropped the demand, deeming it a technical lapse. The Revenue appealed, challenging the dropping of demand, and the respondent appealed on the interest demand. The respondent's appeal on interest was allowed, and the Revenue's appeal on the Credit was also allowed, leading to the appellant's appeal.

Discrepancy in Duty Payment by the Supplier:
The appellant argued that under Modvat Credit Rules, the recipient need not verify if the correct duty was paid by the supplier. They contended that since the total duty was now paid, there was no basis to deny the credit. The appellant cited judgments supporting the notion that the recipient is not obligated to ensure the supplier's duty payment. The Revenue maintained that Credit should only be allowed for the actual duty paid by the supplier at clearance, which was 50% in this case.

Denial of Credit by the Revenue:
The Revenue insisted that Credit should only be granted for the duty actually paid by the supplier at the time of clearance, which was 50%. However, the appellant argued that the total duty had been paid, eliminating the grounds for Credit denial. They highlighted that Modvat Credit Rules did not require the recipient to verify the supplier's duty payment for Credit availment.

Appeal Challenging Demand of Interest:
The Revenue's appeal challenging the demand of interest was allowed, while the appellant's appeal on the Credit issue was also allowed. The Tribunal found that the lower authority erred in disallowing the Credit, especially after confirming that the short-paid duty was later discharged by the supplier. Consequently, the impugned order was set aside, and the appeal was allowed.