Allowed

M/S International Engineers v. Commissioner of Central Excise

Punjab & Haryana HC11 Sept 2012CEA/13/2012

Case brief

AI extract

What is this about?

The High Court allowed an appeal challenging the denial of Modvat credit. It held that a manufacturer cannot be denied deemed credit solely because the input supplier delayed duty payment or failed to declare correct details on invoices, relying on prior Court precedents.

What did the court decide?

The appeal was allowed; the Tribunal was held not right in holding the appellant liable to pay excise duty.

M/S International Engineers Vs Commissioner of… — Cheque Dishonour | Punjab & Haryana HC (2012)

¶1

CEA No.13 of 2012

¶2

¶3

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

¶4

CEA No.13 of 2012 (O&M) Date of decision:11.9.2012

¶5

M/s International Engineers

¶6

...Appellant

¶7

Versus

¶8

Commissioner of Central Excise

¶9

...Respondent

¶10

CORAM: HON'BLE MR.JUSTICE AJAY KUMAR MITTAL HON'BLE MR. JUSTICE GURMEET SINGH SANDHAWALIA

¶11

Present: Mr. Jagmohan Bansal, Advocate for the appellant. Mr. Sukhdev Sharma, Advocate for the respondent.

¶12

Ajay Kumar Mittal,J .

¶13

The assessee has filed this appeal under Section 35G of the Central Excise Act, 1944 (in short, “the Act”), for quashing order dated 1.9.2011, Annexure A.5 passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (for brevity, “the Tribunal”) in five appeal Nos. E 619-621/04, 667-668/04-SM, claiming following substantial questions of law:-

¶14

a) Whether Tribunal is justified to deny the benefit when learned Tribunal in identical matters has extended the benefit of deemed Modvat and this Hon'ble Court in the case of Vikas Pipe had settled the issue?

¶15

b) Whether the Appellate Tribunal has rightly denied the benefit of Modvat to the appellant on the ground that supplier of inputs has delayed payment of Central Excise duty when appellant is entitled to deemed credit under Notification No.58/97-CE and particularly when appellant had already paid duty to its supplier?

¶16

c) Whether the appellant can be denied the benefit of Modvat on account of default on the part of supplier of inputs when supplier was duly registered with excise department and

¶17

CEA No.13 of 2012

¶18

¶19

working directly under the control of the department and not the appellant?

¶20

d) Whether the applicant can be denied the benefit of Modvat when applicant has duly complied the requirement of Notification No.58/97?

¶21

Briefly, the facts as narrated in the appeal may be noticed. The appellant is a partnership firm engaged in the manufacture of tractor parts falling under Chapter Heading 8708 of the Schedule to Central Excise Tariff Act, 1985. It was availing modvat credit facility in respect of inputs and capital goods. During the course of scrutiny of RT-12 return and other documents for the quarter ending March 1999, it was found that the appellant had taken deemed credit on the invoices in terms of provisions of notification No.58/97 dated 30.8.1997. As per the notification, the manufacturer of the inputs was required to declare on the invoices that appropriate duty of excise had been paid under the provisions of Section 3A of the Act. The suppliers of inputs had not incorporated the above said declaration in the invoices and had not discharged the duty liability in terms of Rule 96ZP of the Central Excise Rules, 1944 (in short, “the Rules). Accordingly, Show Cause Notice dated 27.9.1999 was issued to the appellant as to why the availed credit of ` 55,410/- be not disallowed and recovered from it alongwith interest and penalty. The appellant filed reply contesting the demand. The adjudicating authority held that modvat credit could not be denied on the ground that duty was not payable or was not a normal feature of the inputs. The department filed appeal before Commissioner (Appeals) Chandigarh. Vide order dated 30.10.2003, Annexure A.4, the Commissioner (Appeals) allowed the appeal and set aside the order of the adjudicating authority and confirmed the demand and also imposed

¶22

CEA No.13 of 2012

¶23

¶24

penalty under Rule 57 I and Rule 173Q of the Rules. The appellant filed appeal before the Tribunal. Vide order dated 1.9.2011, Annexure A.5, the Tribunal partly allowed the appeal and while confirming the duty set aside the penalty imposed by the Commissioner (Appeals). Hence this appeal by the appellant.

¶25

Learned counsel for the appellant relied upon judgment of this Court dated 26.8.2011 in CEA No.102 of 2007 ( Commissioner of Central Excise, Jalandhar v. M/s Royal Enterprises Aujla Road, Kapurthala) and contended that the issues involved herein stand concluded by the aforesaid decision, wherein it was 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.

¶26

This Court in Vikas Pipe v. CCE, Chandigarh-II, 2003 (158) ELT 680 held that where deemed credit is claimed in terms of N otification 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. Similar view was taken by this Court in M/s Royal Enterprises's case (supra).

¶27

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. Under the circumstances, the Tribunal was not right and the benefit of discharge of the duty liability by the appellant could not be

¶28

CEA No.13 of 2012

¶29

¶30

denied to the appellant in the light of the judgments of this Court in

¶31

Vikas Pipe' s case and M/s Royal Enterprises's case (supra).

¶32