2010 (9) TMI 949 - HC - Central Excise

MODVAT credit - The case of the department is that M/s. Clutch Auto Ltd. did not actually deposit the excise duty, which was payable on the said inputs, which were supplied to the assessee - Held that - Once a buyer of inputs receives invoices of excisable items, unless factually it is established to the contrary, it will be presumed that when payments have been made in respect of those inputs on the basis of invoices, the buyer is entitled to assume that the excise duty has been/will be paid by the supplier on the excisable inputs. The buyer will be therefore entitled to claim Modvat credit on the said assumption. So far as remaining amount of Modvat credit is concerned, Because of the complete silence in the Tribunal s order on the said remaining issues, we remand the case back to the Tribunal after setting aside that portion of the impugned order - matter on remand.

Summary

Issues:
Claim of Modvat credit on excisable items; Dispute over payment of excise duty by supplier; Interpretation of Rule 57G; Applicability of Rule 57-I and Tribunal decision; Unpressed defence by the assessee leading to remand.

Analysis:
The case involved a dispute regarding the claim of Modvat credit by the respondent-assessee on excisable items supplied by a particular supplier. The respondent claimed Modvat credit on invoices issued by the supplier, even though the department alleged that the supplier did not deposit the excise duty on the inputs supplied. The Tribunal ruled in favor of the assessee, stating that the buyer, upon receiving invoices and making payments, can presume that the excise duty has been or will be paid by the supplier. The Court agreed with this reasoning, emphasizing that it is impractical to expect buyers to verify the supplier's accounts or the duty payment status with the Central Excise department.

The appellant relied on Rule 57G, arguing that Modvat credit cannot be availed unless duty has been paid on inputs. However, the Court disagreed with this interpretation, stating that the buyer's entitlement to claim Modvat credit is based on the assumption of duty payment by the supplier upon receipt of invoices and payment. The Court also referenced Rule 57-I and a Tribunal decision, but concluded that the Tribunal's decision supporting the department was incorrect based on the aforementioned reasoning.

Regarding the remaining amount of Modvat credit, the defence initially taken by the assessee was not pressed before the Tribunal. The assessee claimed to have voluntarily deposited the amount for which Modvat credit was wrongly taken. Due to the Tribunal's silence on this issue, the Court remanded the case back to the Tribunal to address the remaining issues and provide an opportunity for both sides to be heard. The Court's decision highlighted the importance of addressing all relevant issues and ensuring a fair hearing in the proceedings.