2016 (11) TMI 698 - HC - Central Excise

Modvat credit - genuineness of the duty paying documents - Held that - the petitioner in the present case is entitled to Modvat credit on duty paid at the time of purchase of goods vide invoice dated 30-6-1994 from a wholesaler. The requirement that the selling wholesaler should be a dealer registered with the department under the Act was notified on 4-7-1994 vide N/N. 32/94-C.E. (N.T.). For any sale made by a wholesaler prior thereto, there was no such condition - Though the first Appellate Authority accepted the plea raised by the appellant regarding his entitlement of Modvat credit, however, he had put a condition that the supplier should get himself registered under the Act before 31-12-1994. Such a condition could not be made applicable in the case of the petitioner as it was not within his control to get registration for the selling dealer. As regards payment of duty on the goods purchased by the petitioner is concerned, necessary facts pertaining thereto were noticed by the Commissioner (Appeals) in his order with reference to invoice number and date, which was issued by the manufacturer M/s. Bharat Heavy Electricals Limited. As per those details, the excise duty was debited in the PLA account on 17-6-1994. The appellant entitled to Modvat credit - appeal allowed.

Summary

Issues:
Denial of Modvat credit on goods purchased from a wholesale dealer, imposition of penalty, conditions imposed for Modvat credit entitlement, requirement of registration for the selling dealer, payment of duty on purchased goods.

Analysis:

1. Denial of Modvat Credit and Imposition of Penalty:
The petitioner was denied Modvat credit on goods purchased from a wholesale dealer, leading to a penalty of ?65,035 imposed by the adjudicating authority. However, the Commissioner (Appeals) overturned this decision on appeal, subject to verification of document genuineness. The petitioner then appealed to the Customs, Excise & Gold (Control) Appellate Tribunal, which rejected the appeal. The issue revolved around the denial of Modvat credit and the subsequent penalty imposed, which was a significant point of contention in the case.

2. Entitlement to Modvat Credit and Registration Requirement:
The High Court found that the petitioner was entitled to Modvat credit on duty paid for goods purchased from a wholesaler on 30-6-1994. It was highlighted that the requirement for the selling wholesaler to be a registered dealer under the Act was notified only on 4-7-1994. Therefore, any sales made by a wholesaler before this date did not require such registration. The Court analyzed the relevant notifications dated 30-3-1994 and 4-7-1994 to establish the conditions for Modvat credit entitlement based on the timeline of the purchase.

3. Condition for Registration and Payment of Duty:
The first Appellate Authority accepted the petitioner's claim for Modvat credit but imposed a condition that the supplier should be registered under the Act by 31-12-1994. The High Court noted that such a condition was beyond the petitioner's control and could not be enforced retroactively. Additionally, the payment of duty on the purchased goods was verified by the Commissioner (Appeals) with reference to the invoice issued by the manufacturer, M/s. Bharat Heavy Electricals Limited, where the excise duty was debited on 17-6-1994.

4. Decision and Relief Granted:
Considering the facts and legal provisions, the High Court found merit in the petitioner's case and allowed the petition. It directed that the petitioner should be entitled to Modvat credit of ?65,035 for the purchase made through the invoice dated 30-6-1994. The judgment provided clarity on the conditions for Modvat credit entitlement, registration requirements for selling dealers, and the retrospective application of such conditions, ensuring justice in the matter.