2016 (3) TMI 342 - AT - Central Excise

Duty liability - whether the Respondent has any control over the IOCL in discharge of duty liability by the latter - Held that - Certainly, the answer shall be negative when assessee does not have any control over that concern. Respondent acted in good faith and paid duty on the basis of invoice and claimed MODVAT credit of the duty so paid. When the seller of the goods is liable to discharge the duty, his lapse shall not constitute an offence for the buyer of the goods. Having no mandate in the law in that regard and in absence of legislation that the buyer shall be jointly and severally liable in the event of no discharge of duty by the seller, the respondent should not be penalized under law. Therefore, following the ratio laid down by the Hon ble Supreme Court in the case of CCE, Jalandhar Vs. Kay Kay Industries (2013 (8) TMI 772 - SUPREME COURT ), Revenue appeal is dismissed.

Summary

Issues:
1. Duty dischargeability by buyer when seller fails to pay duty to the government.
2. Correctness of relief granted by Commissioner (Appeals) to the respondent.
3. Examination of factual matrix and control over duty liability by the buyer.

In the judgment by Appellate Tribunal CESTAT CHENNAI, the Revenue contended that duty should be discharged by the buyer-respondent who purchased goods from Indian Oil Corporation Ltd. (IOCL) when IOCL failed to discharge duty to the Government, challenging the relief granted by the Commissioner (Appeals) to the respondent. The Tribunal noted the absence of the respondent and examined the record with the assistance of a learned Advocate. It was observed that the Commissioner (Appeals) had issued a cryptic order without applying relevant legal principles to the case.

Upon thorough examination of the factual matrix, it was revealed that the respondent had purchased furnace oil from IOCL against an invoice showing payment of excise duty, although IOCL did not pay the duty to the Government. The Tribunal considered whether the respondent had control over IOCL in discharging duty liability, concluding that the respondent did not have such control. The respondent acted in good faith, paid duty based on the invoice, and claimed MODVAT credit for the duty paid. The Tribunal emphasized that when the seller is liable to discharge duty, the buyer should not be penalized for the seller's lapse, especially in the absence of a legal mandate making the buyer jointly and severally liable. The Tribunal relied on the precedent set by the Hon'ble Supreme Court in CCE, Jalandhar Vs. Kay Kay Industries, dismissing the Revenue's appeal based on this reasoning.

In light of the above analysis, the Appellate Tribunal CESTAT CHENNAI upheld the respondent's position, emphasizing the lack of legal obligation on the buyer to be liable for the seller's duty discharge and the respondent's good faith in paying duty based on the invoice. The judgment serves as a reminder of the importance of legal principles and factual examination in resolving disputes related to duty dischargeability in commercial transactions.