2010 (3) TMI 628 - AT - Central Excise

Deemed Credit - The show cause notices were issued to the respondents alleging that the invoices from the supplier did not contain declaration that appropriate duty liability has been discharged under Rule 96ZP as required under Notification No. 58/97. The original authority denied the entire credit taken on the invoices issued by M/s. Guru Arjan Iron & Steel Rolling Mills. Commissioner (Appeals) set aside the order of the original authority and allowed the appeals of the respondents. Held that in the light of the decision of Amit Engineering Co. applicable. Revenue s appeal dismissed.

Summary

Issues:
Department appealing against Commissioner (Appeals) order denying modvat credit due to lack of declaration on supplier invoices under Notification No. 58/97-C.E. Whether the supplying unit paid appropriate duty as per Rule 96ZP. Applicability of Tribunal decisions in Magnus Steels Pvt. Ltd., Punia Engineering Co., and Amit Engineering in determining duty liability and deemed credit entitlement.

Analysis:
The appeals by the Department were against the Commissioner (Appeals) order concerning the denial of modvat credit by the respondents due to the absence of a declaration on supplier invoices as per Notification No. 58/97-C.E. The supplying unit, M/s. Guru Arjan Iron & Steel Rolling Mills, operated under a compounded levy scheme and claimed deemed modvat credit. The Department alleged that the supplying unit did not discharge the appropriate duty liability as required. The original authority denied the credit, but the Commissioner (Appeals) reversed this decision and allowed the appeals of the respondents.

During the hearing, the Department argued that the supplying unit did not pay the full duty liability, contrary to the rate fixed by the Commissioner. They contended that the Commissioner (Appeals) erred in allowing the appeals and cited the Tribunal decisions in Punia Engineering Co. and Amit Engineering as relevant to the case, rather than Magnus Steels Pvt. Ltd. The respondents' advocate, however, pointed out that the decision in Magnus Steels Pvt. Ltd. was upheld by the High Court, and the Tribunal overruled Punia Engineering Co. in Amit Engineering's case.

Considering the submissions, the Member (T) noted that the supplying unit operated under a compounded levy scheme and discharged duty liability as per Rule 96ZP(3). The exact nature of any dispute at the supplying unit's end was not clear from the records. The Member emphasized that the correctness of duty liability at the supplying unit's end falls under the jurisdiction of Central Excise authorities there. It was established that once the supplying unit paid duty under the compounded levy scheme, the recipient unit was entitled to deemed credit under Notification 58/97. The extent of deemed credit was not contingent on duty paid on each clearance by the supplier, as it was granted as deemed credit. The Member found the decision in Amit Engineering Co. applicable to the present case, leading to the rejection of the Department's appeals.