2015 (9) TMI 771 - HC - Central Excise

Contravention of the provisions of Rule 57 G - Availment of MODVAT Credit - Whether Modvat Credit can be allowed to the buyers based on the invoices of the suppliers showing particulars of duty, though in reality no duty was admittedly paid on the goods by the suppliers - Held that - CESTAT failed to take note of the fact that there is an admission by the first respondent/assessee in their letter dated 26.09.2000 that on verification, it has been found that no duty had been paid by the M/s.Indian Oil Corporation Limited and they voluntarily reversed the Modvat credit of ₹ 2,47,406/- as per the details given in Show Cause Notice. This fact has not been considered by the CESTAT in proper perspective, while rejecting the Revenue s appeal. On this ground, we set aside the order of the CESTAT dated 03.02.2006 and the matter is remanded to Customs, Excise and Service Tax Appellate Tribunal for de novo consideration. - Decided in favour of Revenue.

Summary

Issues:
1. Whether Modvat Credit can be allowed based on invoices showing duty particulars without actual duty payment by suppliers?

Analysis:
The case involved an appeal by the Revenue against the Customs, Excise and Service Tax Appellate Tribunal's order regarding the allowance of Modvat credit to a manufacturer. The manufacturer had availed Modvat credit on goods under invoices issued by a supplier, Indian Oil Corporation Limited, even though no Central Excise duty was paid on those goods. A show cause notice was issued to the manufacturer for contravention of Rule 57 G, questioning the credit availed. The manufacturer contended that they had paid the excise duty to the supplier and thus were entitled to the credit. However, upon further investigation, it was found that the duty was not paid by the supplier. The Adjudicating Authority disallowed the credit and imposed a penalty, which was later set aside by the First Appellate Authority citing a precedent.

The Revenue appealed the decision to the Customs, Excise and Service Tax Appellate Tribunal, arguing that unlike the precedent case, the duty had not been subsequently recovered from the input supplier in this instance. The Tribunal noted that there was no dispute regarding the receipt of inputs by the manufacturer under valid invoices showing duty payment particulars. The Tribunal rejected the Revenue's appeal based on these grounds.

Subsequently, the Revenue appealed to the High Court, arguing that the Tribunal failed to consider the manufacturer's admission that no duty had been paid by the supplier, leading to the reversal of the credit. The High Court, upon reviewing the facts and submissions, found that the Tribunal had not properly considered this admission. Therefore, the Court set aside the Tribunal's order and remanded the matter for fresh consideration.

In conclusion, the High Court allowed the appeal by the Revenue, directing a reevaluation by the Tribunal. No costs were awarded, and the connected miscellaneous petition was closed.