2006 (9) TMI 108 - HC - Central Excise

Defect in the format of invoice issued by seller & no other defect found for availing credit - petitioner fulfilled all requirements - credit availed cannot be withdrawn Delay in filing of appeal because of bonafide belief - soft copy of the e-mail sent to the General Manager didn t receive due to fault in transmission - petitioner remained under belief that the appeal has been filed within limitation because of this reason petitioner can t be deprived of his right to appeal

Summary

Issues Involved:
1. Entitlement to Modvat credit by the petitioner company.
2. Procedural breaches by the seller, Ms. Murablack India Ltd., and their impact on the petitioner.
3. Timeliness and procedural aspects of the appeal filed by the petitioner.
4. Jurisdiction and exercise of extraordinary jurisdiction by the High Court.

Detailed Analysis:

1. Entitlement to Modvat Credit by the Petitioner Company:
The petitioner, a private limited company manufacturing tyres, tubes, and flaps, used carbon black as an input and availed Modvat credit based on the duty paid by the seller, Ms. Murablack India Ltd., an Export Oriented Unit (EOU). The adjudicating authority disallowed the Modvat credit availed by the petitioner, arguing that the seller was not entitled to operate under the Modvat scheme as per Rule 57-A/57-AB of the Central Excise Rules, 1944. The court found that the petitioner was entitled to avail Modvat credit on the duty actually paid by the seller, and the breaches committed by the seller should not affect the petitioner's entitlement.

2. Procedural Breaches by the Seller and Their Impact on the Petitioner:
The adjudicating authority argued that the seller, Ms. Murablack India Ltd., committed breaches by issuing invoices under Rule 52-A instead of Rule 100-E and selling goods in the domestic market without following the regulatory directions applicable to an EOU. The court held that the petitioner cannot be penalized for the seller's breaches, as the petitioner fulfilled all conditions required for availing Modvat credit. The court emphasized that the buyer and seller are independent entities, and the petitioner should not bear the consequences of the seller's procedural breaches.

3. Timeliness and Procedural Aspects of the Appeal Filed by the Petitioner:
The petitioner's appeal against the adjudicating order was filed late due to a miscommunication and deletion of an email. The Commissioner (Appeals) dismissed the appeal as barred by limitation, as he had no power to condone the delay beyond the prescribed period. The High Court exercised its extraordinary jurisdiction, considering the genuine misapprehension and the substantial failure of justice that would result from depriving the petitioner of the right to appeal.

4. Jurisdiction and Exercise of Extraordinary Jurisdiction by the High Court:
The High Court acknowledged that ordinarily, it would not exercise extraordinary jurisdiction when an alternative remedy is available. However, given the special facts and circumstances, including the genuine reasons for the delay and the substantial failure of justice, the court decided to exercise its extraordinary jurisdiction. The court reviewed the merits of the case and found that the petitioner had fulfilled all necessary conditions for availing Modvat credit, and the procedural breaches by the seller should not affect the petitioner's entitlement.

Conclusion:
The High Court quashed the adjudicating order dated 30.11.2004, holding that the petitioner was entitled to avail Modvat credit on the duty actually paid by the seller, and the procedural breaches by the seller did not affect the petitioner's entitlement. The court allowed the writ petition and set aside the demand created against the petitioner, emphasizing that the petitioner fulfilled all conditions required for availing Modvat credit, and the procedural breaches by the seller were beyond the petitioner's control.