2014 (5) TMI 564 - HC - Central Excise

Denial of CENVAT Credit - Notification No. 58/97 - supplied of goods did not pay duty - Held that - even if the manufacturer-supplier had not paid Central Excise duty and given a wrong certificate/no certificate on the body of invoices about discharging of its liability, the assessee could not be held liable for the payment of the Central Excise duty on the goods cleared. - where deemed credit is claimed in terms of Notification No. 58/97-C.E. and the supplier has issued the invoices certifying that inputs had suffered excise duty, then there is no requirement in the said notification that the assessee is required to establish that the supplier has discharged its excise duty liability. The appellant-assessee had discharged the duty liability. The Tribunal disallowed the benefit thereof to the appellant on the ground that belated payment of compounding levy by input supplier shall not entitle the appellant to the deemed credit in respect of input subjected to such levy - Tribunal was not right and the benefit of discharge of the duty liability by the appellant could not be denied to the appellant - Tribunal was not right in holding that the appellant was liable to pay excise duty - Decided in favor of assessee.

Summary

Issues:
- Denial of Modvat benefit by the Tribunal
- Applicability of Notification No. 58/97-C.E.
- Liability of the appellant for excise duty payment
- Benefit of discharge of duty liability by the appellant

Denial of Modvat Benefit by the Tribunal:
The appellant, a partnership firm manufacturing tractor parts, availed Modvat credit facility for inputs and capital goods. A show cause notice was issued as suppliers did not declare duty payment on invoices as required by Notification No. 58/97. The adjudicating authority held Modvat credit could not be denied due to non-payment of duty by suppliers. The Commissioner (Appeals) overturned this decision, imposing a demand and penalty. The Tribunal partially allowed the appeal, confirming duty but setting aside the penalty. However, the appellant contended that the Tribunal erred in denying the Modvat benefit based on delayed payment by suppliers.

Applicability of Notification No. 58/97-C.E.:
The appellant argued that previous judgments, including Vikas Pipe v. CCE, Chandigarh-II, and M/s. Royal Enterprises, supported their position. These cases established that if suppliers certify that inputs suffered excise duty, the appellant is not required to prove the discharge of duty liability by suppliers. The appellant had fulfilled duty liability requirements, and the Tribunal's decision to deny the benefit based on supplier actions was incorrect. The appellant's compliance with Notification No. 58/97 should have entitled them to the Modvat benefit.

Liability of the Appellant for Excise Duty Payment:
The appellant's liability for excise duty payment was a central issue. The Tribunal's decision to disallow the Modvat benefit due to the supplier's delayed compounding levy payment was challenged. The appellant had already discharged duty liability, and previous court judgments supported their position. The Tribunal's reasoning was deemed incorrect, and the appellant should not have been held liable for excise duty payment under the circumstances.

Benefit of Discharge of Duty Liability by the Appellant:
Ultimately, the Court ruled in favor of the appellant, citing that the Tribunal's decision to hold the appellant liable for excise duty was erroneous. The appellant had fulfilled duty liability requirements as per Notification No. 58/97-C.E. and previous court precedents. The Court found that the appellant should not be denied the Modvat benefit based on the actions of the suppliers. Consequently, the substantial questions of law were resolved in favor of the appellant, leading to the allowance of the appeal against the Revenue.