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TMI Blog2006 (9) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... hereon by the seller in terms of Rule 57-A/57-AB as was amended from time to time. 3. During the relevant period, from January, 1999 to June, 2000 brake up of which has been stated in the impugned order passed by the adjudicating authority, the assessee has purchased carbon black as inputs for the manufacturing of its end product from Ms. Murablack India Ltd. Tarapur stated to be a hundred percent Export Oriented Unit (for short "EOU") on the basis of invoices issued by the seller to the petitioner showing the Duty paid by the seller in respect of carbon black sold by the petitioner-company. The petitioner availed the modvat credit on the sum stated in such invoices to be paid as a Duty by the seller during the aforesaid period. The fact that the seller has actually paid the duty shown in the invoices is not in dispute. 4. It appears that said Ms. Murablack India Ltd. had sold the carbon black manufactured by it in domestic trade area without following the regulatory directions applicable to it as hundred percent EOU, which led to the initiation of proceedings against said Ms. Murablack India Ltd. for levy and recovery of full duty paid on the goods in question manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... breach committed by the assessee but the issuance of the invoice was under the control of the selling person and therefore, so long as the assessee has fulfilled all conditions, which were required to be fulfilled by him which was in his domain, the modvat credit cannot be recalled on mere technical grounds. 7. So far as the first contention is concerned that no part of the modavt credit availed by the petitioner - assessee related to any cenvat credit availed by the seller unauthorizedly is now no more in dispute. It is now the common ground that the Duty in respect of which the assessee has availed the modvat credit was Duty actually paid by the selling unit. Albeit according to the respondents he has indulged into domestic area trading without following due procedure laid down in that regard under the terms and conditions under which he availed the status of hundred percent EOU and he was liable to pay full Duty on the goods removed by him to the domestic market. However, the principal ground which prevailed with the adjudicating authority was that because of noncompliance of certain provisions by the seller Ms. Murablack India Ltd., the seller was required to pay higher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority held that the petitioner availed the modvat credit during the period January, 1999 to June, 2000 irregularly which is recoverable under Rule 57-AH (1) read with Section 11-A of the Central Excise Act, 1944 and being in violation of the prescribed Rules penalty under Rule 173Q is also imposable. 9. Thus, apart from disallowing the modvat credit availed during the aforesaid period on carbon black utilized by the assessee as inputs as manufacturer of its own end product which he purchased from Ms. Murablack India Ltd. was disallowed and the penalty of Rs.10 Lacs was imposed. 10. The aforesaid order was first subjected to appeal albeit after expiry of limitation and the appeal having been rejected being barred by time and the condonation of delay of period exceeding 30 days, being beyond the jurisdiction of Commissioner (Appeals), this petition has been preferred here challenging the order of Adjudicating Authority directly. 11. While the respondents have raised objection as to the availability of the alternative remedy which the assessee has failed to avail and because of that this petition ought not to be entertained, we first consider this objection to the exer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been filed in time. In the circumstances, on enquiry being made from Shri S.C. Arora by another official he got the message that the appeal has been filed within time. The same answer was given to the Superintendent, Central Excise, Kankroli when he enquired from the company officials whether any appeal has been filed against the order dated 30.11.2004 or not or whether any interim order has been passed on the application. Since, the copy of the appeal and the stay application was not available with Shri C.P. Sharma, Dy. Manager (Excise) who was to deal with matters for its pursuit before the appellate authority, he procured a hard copy of the appeal and the stay application from Shri Arora which was made available to him on 19.3.2005. Thereafter, the petitioner's officials at Delhi and Kankroli remained under the impression that the appeal along with stay application which was prepared in time has been filed in time before the Appellate Authority. It was for the first time when the Superintendent, Central Excise asked the petitioners to produce copy of interim order, if any, passed on the stay application and also to produce copy of the appeal and the stay application wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial penalty for breach of the rules, it is apparent that the foundation of these proceedings is some default or breaches alleged to have been committed by Ms. Murablack in the matter of selling its product in Domestic Market in breach of some regulatory procedural matters, which may have rendered the said manufacturer to higher duty. There is no allegations of any breach committed by the petitioner. The facts that the petitioner is a purchaser of the goods which are used by it in the manufacture of its end product; that the Duty on the goods sold to the assessee, the petitioner, as stated in invoice received by it and filed alongwith declaration was actually paid by the seller - Ms. Murablack; that the petitioner - assessee has availed modvat credit only in respect of the duty actually paid by the seller; that the seller has issued invoice under Rule 52A in respect of the goods sold to the assessee contained all relevant particulars including Excise Duty paid thereon and declaration required to be made by the petitioner at the time of availing modvat credit before the competent authority were duly made and submitted with invoices received by the petitioner are not the facts in di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its end product and the duty paid by him on the inputs he can avail the benefit thereof while liability to pay excise duty arise on removal of end products manufactured by him but to a given transaction the modvat credit scheme does not apply to a seller. 21. Rule 57-A envisages that credit of any Duty of Excise or the Additional Duty under Section 3 of Customs Tariff Act, 1975 (51 of 1975), as may be specified in the said notification paid on the goods and used in the manufacture of the said final products, which are referred to as inputs can be availed by such manufacturer. It also envisages that the credit of specified Duty allowed under sub-rule (1) shall be utilised towards payment of Duty of Excise leviable on the final products, whether under the Excise Act or under any other Act, as may be specified in the notification issued under sub-rule(1) and subject to provisions of this section and the conditions and restrictions, if any. Apparently, if one keeps in view the basic element of availing modvat/cenvat credit in respect of use of any inputs, the provisions of Section 100-H (1) and (2) can only be referred to modvat credit which otherwise would have been availed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mestic trade area is unsustainable. This line of contention is not otherwise pursued by the respondents. The reasons adopted by the adjudicating authority suffers from patent error to the extent it seeks to penalize the petitioner for alleged default committed by M/s. Murablack by relying upon Rule 100H of the Central Excise Rules, 1944. 24. This takes us to consider the only surviving reason for denying the modvat credit to the petitioner that the invoices received from the seller which were under Rule 52A and not under Rule 100E. 25. Learned counsel for the respondents urged that Rule 100-E provides for issuance of invoices by the hundred percent EOU and lays down the manner and mode under which the invoice is to be prepared by such unit. Coupled with this provision, learned counsel for the respondents urged that since under Rule 57G, the petitioner was intending to avail modvat credit in respect of Duty paid on inputs used by him, he was required to furnish along with declaration a copy of invoice issued either under Rule 52A or Rule 100E. Since the petitioner was a buyer from hundred percent EOU, the invoice required to be submitted by him ought to have been issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Duty due on the inputs has been paid and such inputs have actually been used or are to be used in the manufacture of final products of the recepient, the availing of modvat credit should not ordinarily be denied. Sub-rule (13) of Rule 57T and sub-rule (11) of Rule 57G simultaneously put on the statute book by notification dated 9.2.1999 are pari-meteria in their expression. 27. It has been brought to our notice a Bench decision of this Court rendered in DB Central Excise Appeal No.19/2005 in case of UOI Vs. M/s. Aditya Cement Ors., decided on 9.11.2005 in which provisions of sub-rule (13) of Rule 57T has been considered. Construing the said provisions and noticing that the like provisions have been inserted in Rule 57G by inserting sub-Rule (11) by the very same notification, this Court concluded that coupled with the requirement to pass reasoned order, the aforesaid provision makes it abundantly clear that modvat credit should not be denied merely on technical and procedural breach if the substantial conditions about the actual payment of duty on the inputs/capital goods and the same has been used by the manufacturer in manufacture of final goods in his factory a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authenticate the papers submitted, its consequences cannot fall on the assessee if other conditions are satisfied namely payment of duty on the inputs/capital goods, the actual use of goods brought into the factory in the manufacture of end product by the assessee." 31. By the parity of reasoning when the manner or mode of issuing of invoice is within the control of seller upon which the assessee - buyer has no control, he cannot be punished for not issuing invoice properly which remain the only cause which can apparently be put forward by the revenue and which has actually been put forward by the revenue for denying modvat credit. 32. In this connection, it will not be out of place to mention here that soon after the insertion of sub-rule (11) of Rule 57G and sub-rule (13) in Rule 57T, a circular was issued by the Central Board of Excise on 23.2.1999 empowering the Assistant Commissioner of Central Excise having jurisdiction over the factory of the manufacturer to allow credit of duty paid on inputs/capital goods ignoring minor procedural lapses in filing the declaration or in the invoice/document based on which credit is to be taken. The said Circular reads as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has failed to submit declaration as contemplated in the Modvat Rules or furnished incomplete declaration then for such procedural lapses in furnishing complete details in declaration or delayed declaration modvat benefit, ought not be withdrawn. It mandates not to issue show cause notice for withdrawing MODVAT credits availed by any manufacturer without conducting inquiries and satisfying that the Modvat credit availed by the assessee does not satisfy itself the substantive conditions. Adjudication proceedings in the normal course should not be initiated and show cause notice for withdrawal of modvat credit benefits be not issued lightly on technical grounds." 35. Significantly, the aforesaid Circular of the Board makes it abundantly clear that merely on any defect in the invoice, the modvat credit which is otherwise available to the manufacturer ought not to be denied on the basis of that defect. Since we have noticed that the only surviving contention of the revenue was the defect in the format of invoice issued by the selling manufacturer and no other defect as such has been found for availing of the modvat credit, therefore, on the anvil of the aforesaid Circular o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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