advocatemmmohan

My photo

ADVOCATEMMMOHAN -  Practicing both IN CIVIL, CRIMINAL AND FAMILY LAWS,Etc.,

WELCOME TO LEGAL WORLD

WELCOME TO MY LEGAL WORLD - FOR KNOWLEDGE IN LAW & FOR LEGAL OPINIONS - SHARE THIS

Monday, August 26, 2013

MODVAT- The respondent-company availed deemed MODVAT credit of Rs.77,546/- during the quarter of March, 2000 on the strength of invoices issued by M/s. Sawan Mal Shibhu Mal Steel Re-Rolling Mills, Mandi Govindgarh. During MODVAT verification it was found that the supplier of inputs had not discharged full duty liability for the period covered by the invoices. = Sub-rule (6) of Rule 57A in exercise of which the notification has been issued is as follows: - “(6) Notwithstanding anything contained in sub-rule (1), the Central Government may, by notification in the Official Gazette, declare the inputs on which the duty of excise paid under section 3A of the Central Excise Act, 1944 (1 of 1944), shall be deemed to have been paid at such rate or equivalent to such amount as may be specified in the said notification, and allow the credit of such duty in respect of the said inputs at such rates or such amount and subject to such conditions as may be specified in the said notification: Provided that the manufacturer shall take all reasonable steps to ensure that the inputs acquired by him are goods on which the appropriate duty of excise as indicated in the documents accompanying the goods, has been paid under section 3A of the Central Excise Act, 1944 (1 of 1944).”= “Whether the manufacturer of final products is entitled to deemed credit, under Notification 58/97-CE dated 30.8.97 when the manufacturer-supplier of inputs has not paid Central Excise Duty and given a wrong certificate on the body of invoices about duty dischargement under Rule 96ZP of Central Excise Rules, 1944?” = there is no dispute that a declaration was given by the manufacturer of the inputs indicating that the excise duty had been paid on the said inputs under the Act. It is also not in dispute that the said inputs were directly received from the manufacturer but not purchased from the market. There is no cavil over the fact that the manufacturer of the inputs had declared the invoice price of the inputs correctly in the documents. It is perceivable from the factual matrix that the only allegation is that at the time of MODVAT verification it was found that the supplier of the inputs had not discharged full duty liable for the period covered under the invoices. This lapse of the seller is different and not a condition or rather a pre-condition postulated in the notification. 25. Mr. Prasad, learned counsel for the revenue has vehemently urged that it was requisite and, in a way imperative, on the part of the assessee to verify from the concerned authority of the department whether the excise duty had actually been paid or not. The aforesaid submission leaves us unimpressed. As we notice Rule 57A (6) requires the manufacturer of final products to take reasonable care that the inputs acquired by him are goods on which the appropriate duty of excise as indicated in the documents accompanying the goods, has been paid. The notification has been issued in exercise of the power under the said Rule. The notification clearly states to which of those inputs it shall apply and to which of the inputs it shall not apply and what is the duty of the manufacturer of final inputs. Thus, when there is a prescribed procedure and that has been duly followed by the manufacturer of final products, we do not perceive any justifiable reason to hold that the assessee-appellant had not taken reasonable care as prescribed in the notification. Due care and caution was taken by the respondent. It is not stated what further care and caution could have been taken. The proviso postulates and requires “reasonable care” and not verification from the department whether the duty stands paid by the manufacturer-seller. When all the conditions precedent have been satisfied, to require the assessee to find out from the departmental authorities about the payment of excise duty on the inputs used in the final product which have been made allowable by the notification would be travelling beyond the notification, and in a way, transgressing the same. This would be practically impossible and would lead to transactions getting delayed. We may hasten to explicate that we have expressed our opinion as required in the present case pertaining to clauses 4 and 5 of the notification. 26. Consequently, we concur with the view expressed by the High Court and accordingly the appeals, being devoid of merit, stand dismissed without any order as to costs.

                      published in http://judis.nic.in/supremecourt/filename=40690
  IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL No. 7031 of 2009

Commissioner of Central Excise, Jalandhar               … Appellant

                                   Versus

M/s. Kay Kay Industries                                   … Respondent

                                    WITH

                        CIVIL APPEAL No. 7032 of 2009

                                    WITH

                        CIVIL APPEAL No. 7034 of 2009

                                    WITH

                        CIVIL APPEAL No. 7392 of 2010

                                    WITH

                        CIVIL APPEAL No. 7393 of 2010

                                    WITH

                        CIVIL APPEAL No. 7148 of 2013
                (Arising out of S.L.P. (C) No. 26499 of 2008)



                               J U D G M E N T


Dipak Misra, J.


      Leave granted in Special Leave Petition (C) No. 26499 of 2008.

2. The controversy that emerges for consideration in this batch of  appeals,
   being consubstantial, was heard together and is disposed of by  a  common
   judgment.  For the sake of convenience the facts from  Civil  Appeal  No.
   7031 of 2009 are set out herein.

3. The  respondent-company  availed  deemed  MODVAT  credit  of  Rs.77,546/-
   during the quarter of March, 2000 on the strength of invoices  issued  by
   M/s. Sawan Mal Shibhu  Mal  Steel  Re-Rolling  Mills,  Mandi  Govindgarh.
   
During MODVAT verification it was found that the supplier of  inputs  had
   not discharged  full  duty  liability  for  the  period  covered  by  the
   invoices.
The Competent Authority was of the view that appropriate  duty
   of excise had not been paid by  the  manufacturer  of  inputs  under  the
   invoices on the strength of which the  respondent  took  the  benefit  of
   deemed MODVAT credit and it was obligatory on the part of the  respondent
   to take all reasonable steps to  ensure  that  the  appropriate  duty  of
   excise had been paid on the inputs used in the manufacture of their final
   product as required under Rule 57A(6) of the Central Excise  Rules,  1944
   (for short “the Rules”) read with  notification  No.  58/97-CE(NT)  dated
   30.8.1997 and the aforesaid opinion of the Competent Authority  persuaded
   him to issue a show-cause  notice  on  19.1.2001  proposing  recovery  of
   deemed MODVAT credit of  Rs.77,546/-  and  imposition  of  penalty.   
The
   adjudicating authority, after receipt of  the  reply  to  the  show-cause
   notice, by order dated 22.3.2002, disallowed the  deemed  MODVAT  benefit
   earlier availed and ordered for recovery  of  the  said  sum  along  with
   interest, and, further imposed penalty of Rs.40,000/-.

4. Being aggrieved by  the  aforesaid  order  the  respondent  preferred  an
   appeal before
the Commissioner (Appeals), Central Excise, Jalandhar,  who
   ruled that the credit of deemed  duty  paid  by  the  manufacturer  under
   Section 3A of the Central Excise Act, 1944, (for brevity “the  Act”)  was
   available subject to the condition that the inputs were received directly
   from the factory of manufacturer under  cover  of  an  invoice  declaring
   therein that the appropriate duty of excise had been paid on such  inputs
   under the provisions of the Act.  
The appellate authority referred to the
   provisions of sub-rule (6) of Rule 57A and notification No.  58/97-CE(NT)
   dated 1.9.1997 and opined that the manufacturer of  the  inputs  had  not
   discharged the appropriate duty liability against the goods cleared  vide
   the  invoices  and  the  respondent  had  not  furnished  the   requisite
   documentary evidence which could  controvert  the  said  allegation  made
   against the manufacturer of inputs.   
The  appellate  authority  observed
   that unless and until payment of appropriate  duty  had  been  made,  the
   assessee could not have availed the benefit.  Expressing such an opinion,
   it concurred with the view taken by the adjudicating authority.  However,
   it reduced the penalty from Rs.40,000/- to Rs.20,000/-.

5. The unsuccess in appeal compelled the respondent  to  prefer  Appeal  No.
   E/1474/04-SM  before
the  Customs,  Excise  and  Service  Tax  Appellate
   Tribunal (for short “the tribunal”) and the tribunal placing reliance  on the decision in Vikas Pipes v. CCE[1] came to hold that  the  declaration given by the appellant therein satisfied the conditions enumerated in the  notification for claiming the  deemed  MODVAT  credit  and,  accordingly,  quashed the orders passed by the adjudicating authority and that  of  the
 appellate authority.

6. Questioning the justifiability of the aforesaid order, Revenue  preferred
   Civil Appeal No. 65 of 2006  before  the  High  Court.   The  High  Court
   reproduced the proposed  substantial  question  of  law  which  reads  as
   follows: -

      “Whether the manufacturer of final  products  is  entitled  to  deemed credit,  under  Notification   58/97-CE   dated   30.8.97   when   the manufacturer-supplier of inputs has not paid Central Excise  Duty  and  given  a  wrong  certificate  on  the  body  of  invoices  about  duty  dischargement under Rule 96ZP of Central Excise Rules, 1944?”

7. While dealing with the aforesaid substantial question of  law,  the  High
   Court referred to  its  earlier  decision  in  Vikas  Pipes  (supra)  and
   distinguished the decision in Collector of Central  Excise,  Vadodara  v.
   Dhiren Chemical Industries[2] and ultimately  concurring  with  the  view
   expressed by the tribunal  dismissed  the  appeal.
Hence,  the  present
   appeal by the Revenue.

8. Assailing the legal substantiality of the impugned judgment it  is  urged
   by Mr. Arjit Prasad, learned counsel for the appellant that the  tribunal
   as well as the High Court has fallen into error in  their  interpretation
   of
Rule  57A(6)  of  the  Rules  and  the  notification  which   imposes conditions, for as per the conditions enumerated in the  notification  it is obligatory on the part of the manufacturer of the  final  products  to satisfy the adjudicating authority that appropriate duty  of  excise  had been paid.
 The learned counsel would submit that the “appropriate  duty”
   has been squarely dealt with by the Constitution Bench  in  the  case  of
   Dhiren Chemical Industries (supra) but  the  High  Court  has  failed  to
   appreciate the ratio laid down therein and distinguished the same  in  an
   extremely cryptic manner which makes the verdict sensitively susceptible.

9. Resisting the aforesaid submissions, Mr. Ajay Aggarwal,  learned  counsel
   for the respondent, has contended that the tribunal and  the  High  Court
   have appositely relied upon the  decision  in  Vikas  Pipes  (supra)  and
   correctly  opined  that  the  respondent  had  satisfied  the  conditions
   enshrined in the notification and, therefore, there  was  no  warrant  to
   proceed for recovery of the benefit availed of by the final manufacturer.
    The learned  counsel  would  submit  that  the  “appropriate  duty”,  as
   interpreted by this Court in Dhiren Chemical Industries (supra), supports
   the  case  of  the  respondent  and  the  conditions  prescribed  in  the
   notification having been satisfied, the adjudicating authority as well as
   the first appellate authority has erred  in  holding  that  there  was  a
   failure on the part of the respondent to satisfy the conditions.

10. To appreciate the rival submissions raised  at  the  Bar  and  the  bold
   assertion by Mr. Prasad, learned counsel for the Revenue, that it was the
   duty of the assessee-respondent, the manufacturer of the final  products,
   to see that  the  manufacturer  of  the  inputs  had  actually  paid  the
   appropriate duty on the inputs on the bedrock of law  laid  down  by  the
   Constitution Bench in Dhiren Chemical Industries (supra), it is necessary
   to understand how and under what circumstances the controversy  travelled
   to the Constitution Bench.  Be  it  noted,  the  Constitution  Bench  was
   required to resolve the conflict between the two pronouncements,  namely,
   Collector of Central Excise,  Patna  v.  Usha  Martin  Industries[3]  and
   Motiram Tolaram and another v. Union of India and another[4].

11. In Usha  Martin  Industries  (supra)  the  Court  was  interpreting  the
   exemption notification dated 30.11.1963 as amended on  7.4.1981  and  the
   question before the three learned  Judges  was  
whether  the  benefit  of
   excise duty exemption (granted by the Central Government as  per  certain
   notifications) could be claimed in respect of commodities made out of raw
   material on which no excise duty was payable.
The Central Government had
   exempted iron or steel products falling under a particular category  made
   from certain materials or combination thereof.  One  of  them  was  fresh
   unused re-rollable scrap on which  the  appropriate  amount  of  duty  of
   excise had already been paid.  
The Bench adverted to various aspects and,
   eventually, came to hold that the duty could legitimately be  claimed  by
   the assessee in respect of those goods referred to  in  the  notification
   under consideration the raw material of which were not  exigible  to  any
   excise duty at all.
12.   In Motiram Tolaram (supra),  another  three-Judge  Bench  was  dealing
with notification No. 185 of 1983.
 It  was  a  notification  pertaining  to
exemption of alcohol falling under item 15-A of the First  Schedule  to  the
Central Excises and Salt Act,  1944  and  manufactured  from  vinyl  acetate
monomer, from so much of the duty of excise leviable thereon under the  said
Act at the rate specified in the First Schedule, as in excess of the  amount
calculated at the rate of 10% ad valorem.
The proviso to  the  notification
stipulated that such polyvinyl alcohol was required to be manufactured  from
vinyl acetate monomer on which the appropriate  amount  of  duty  of  excise
under Section 3 of the Central Excises and Salt Act or the  additional  duty
under Section 3 of the Customs Tariff Act, 1975, as the  case  may  be,  had
been paid.
A contention was raised before the Court  that  in  India  there
was only  one  manufacturer  of  polyvinyl  alcohol  and  the  commodity  in
question could be produced only from vinyl acetate monomer  and  the  Indian
manufacturer was, in fact, paying duty at the rate of  10%  ad  velorem  and
that was the only duty which could be charged from the  appellants  therein.
It was urged before the Court that the appellants  were  manufacturing  that
item in India from vinyle acetate  monomer  on  which  appropriate  duty  of
excise had been  paid  and,  therefore,  the  concessional  duty  should  be
charged from them.  
The learned Judges referred to the language employed  in
the exemption notification and opined that  onus  was  on  the  assessee  to
prove  and  show  that  the  conditions,  as  imposed   in   the   exemption
notification, had been satisfied.  
In that context the  Bench  proceeded  to
state that the condition for getting the benefit of the lower rate  of  duty
is that on the raw material used appropriate amount of duty has  been  paid.
If perchance or for any reason, the manufacturer  of  polyvinyl  alcohol  in
India is unable to prove or show that the same has  been  manufactured  from
vinyl acetate monomer on which appropriate amount  of  duty  of  excise  has
been paid, then the said manufacturer would  not  be  entitled  to  get  the
benefit of the said notification.
13.   Thereafter, the Court referred to Section  3  of  the  Customs  Tariff
Act, 1975 and  observed  that  one  has  to  assume  that  the  importer  of
polyvinyl alcohol had actually manufactured  the  same  in  India.  One  can
further assume, possibly without any difficulty,  that  the  said  polyvinyl
alcohol has been manufactured from vinyl acetate  monomer,  but  it  is  not
possible to assume or presume or imagine that the raw material used  is  the
one on which appropriate amount of duty of excise has  been  paid  in  India
and hence, the condition which is contained in the said notification has  to
be fulfilled in order to get the benefit of the notification.

14.   The Court  further  stressing  on  the  purpose  of  the  notification
expressed thus: -
      “11.  It appears to us that Excise Notification No. 185  of  1983  was
      deliberately worded in such a  way  that  the  importer  of  polyvinyl
      alcohol, who may not be  able  to  prove  that  on  the  raw  material
      appropriate duty in India has been paid, will not be able to  get  the
      benefit of the concessional rate of duty. It has to be borne  in  mind
      that the normal duty which is payable on  polyvinyl  alcohol  is  40%.
      That is the rate of excise duty which would be payable  by  an  Indian
      manufacturer of polyvinyl alcohol who is unable to show  that  he  has
      complied with the condition contained in the proviso, namely,  use  in
      the manufacture of vinyl acetate monomer on which  appropriate  amount
      of duty has been paid. Similarly  an  importer  of  polyvinyl  alcohol
      would be required to pay under Section 3  duty  at  the  rate  of  40%
      because on the polyvinyl alcohol imported duty under Section 3 of  the
      Central Excises and Salt Act or additional duty under Section 3 of the
      Customs Tariff Act has not been paid on the vinyl acetate monomer used
      in the manufacture of polyvinyl alcohol. If it was  possible  to  have
      shown that duty-paid vinyl  acetate  monomer  had  been  used  in  the
      manufacture of imported polyvinyl alcohol, then the benefit of  Excise
      Notification No. 185 of 1983 would have been available.”



15. Eventually, the  Court  ruled  that  appropriate  duty  means  the  duty
   payable under the Central Excise and  Salt  Act  or  under  the  Customs
   Tariff Act and the condition had not been satisfied in the said case.

16. As a conflict was perceived in  the  aforesaid  two  judgments,  it  was
   referred  to  the  Constitution  Bench  in  Dhiren  Chemical  Industries
   (supra).  The Constitution Bench adverted to the law laid down  in  Usha
   Margin Industries and Motiram Tolaram (supra)  and,  eventually,  opined
   thus: -
      “6. In the case of Motiram Tolaram reliance was placed upon  the  case
      of Usha Martin to contend that the appropriate duty being nil, because
      the raw material was not manufactured in India, it must be taken  that
      appropriate duty had been paid and the appellants would be entitled to
      the benefit of the exemption notification in question, which used  the
      said phrase. The Court was unable to  agree.  It  said  that  the  raw
      material being an item which was manufactured  in  India,  a  rate  of
      excise duty was leviable thereon. On the raw material which  had  been
      imported, the appropriate amount of duty had not  been  paid.  It  was
      only if this payment had been made  that  the  exemption  notification
      would be applicable.


      7. In our view, the correct interpretation of the said phrase has  not
      been placed in the judgment in the case of Usha Martin. The stress  on
      the  word  “appropriate”  has  been  mislaid.  All   that   the   word
      “appropriate” in the context means is the  correct  or  the  specified
      rate of excise duty.

       8.   An exemption notification that uses the said phrase  applies  to
      goods which have been made  from  duty-paid  material.   In  the  said
      phrase, due emphasis must be given to  the  words  “has  already  been
      paid”.  For the purposes of getting the benefit of the exemption under
      the notification, the goods must be made from raw  material  on  which
      excise duty has, as a matter of fact, been paid, and has been paid  at
      the “appropriate” or correct rate.  Unless the manufacturer  has  paid
      the correct amount of excise duty, he is not entitled to  the  benefit
      of the exemption notification.”

17. At this juncture, we are obliged to state that  the  factual  and  legal
   matrix in the case at hand is quite different.  The  decision  proceeded
   on the language of the notifications.  Moreover, we are not dealing with
   a  notification  for  exemption.   The  controversy  pertains   to   the
   interpretation of the notification No. 58/97-CE  dated  30.8.1997  which
   has been issued in exercise of powers conferred by sub-rule (6) of  Rule
   57A of the Rules dealing with availing of MODVAT  credit  under  certain
   circumstances subject to satisfaction of certain conditions precedent.

18. Before we advert to the notification it is necessary to  refer  to  Rule
   57A(1) and (6).  The relevant part of Rule 57A(1) reads as follows: -

      “57A: Applicability. –
(1) The provisions of this section shall  apply
      to such finished excisable  goods  (hereinafter  referred  to  as  the
      ‘final products’) as the Central Government may,  by  notification  in
      the Official Gazette, specify in  this  behalf,  for  the  purpose  of
      allowing credit of any duty of excise or  the  additional  duty  under
      Section 3 of the Customs Tariff Act, 1975 (51  of  1975),  as  may  be
      specified in the said notification (hereinafter  referred  to  as  the
      ‘specified duty’) paid on the goods used in  or  in  relation  to  the
      manufacture of the said final products whether directly or  indirectly
      and whether  contained  in  the  final  product  or  not  (hereinafter
      referred to as the ‘inputs’) and for utilizing the credit  so  allowed
      towards payment of duty of excise  leviable  on  the  final  products,
      whether under the Act or under any other Act, as may be  specified  in
      the said notification, subject to the provisions of this  section  and
      the  conditions  and  restrictions  that  may  be  specified  in   the
      notification:

              i) Provided that the Central Government may specify the  goods
                 or classes of goods in  respect  of  which  the  credit  of
                 specified duty may be restricted.”

19. Sub-rule (6) of Rule 57A in exercise of which the notification has  been
   issued is as follows: -

      “(6)  Notwithstanding anything contained in sub-rule (1), the  Central
      Government may, by notification in the Official Gazette,  declare  the
      inputs on which the duty of  excise  paid  under  section  3A  of  the
      Central Excise Act, 1944 (1 of 1944), shall be  deemed  to  have  been
      paid at such rate or equivalent to such amount as may be specified  in
      the said notification, and allow the credit of such duty in respect of
      the said inputs at such rates or  such  amount  and  subject  to  such
      conditions as may be specified in the said notification:

            Provided that the manufacturer shall take all  reasonable  steps
      to ensure that the inputs acquired by  him  are  goods  on  which  the
      appropriate duty of excise as indicated in the documents  accompanying
      the goods, has been paid under section 3A of the Central  Excise  Act,
      1944 (1 of 1944).”

                                                         [Emphasis supplied]

20. On a careful reading of Rule 57A(1), it  is  clear  as  crystal  that  a
   manufacturer of final products can avail  the  credit  of  any  duty  of
   excise or the additional duty under Section 3 of the Customs Tariff Act,
   1975, as may be specified by the notification in  the  Official  Gazette
   subject to provisions of the Section and the conditions and restrictions
   that  may  be  specified  in  the  notification.   The  proviso  further
   stipulates that the Central Government may specify the goods or  classes
   of goods in respect of  which  the  credit  of  specified  duty  may  be
   restricted.  Thus, the conditions and restrictions have been left to  be
   prescribed by way of notification  in  respect  of  certain  classes  of
   goods.

21. Sub-rule (6) of Rule 57A commences with a  non-obstente  clause  and  it
   empowers the Central Government  to  issue  notification  declaring  the
   inputs on which the duty of excise paid under Section 3A of the  Act  to
   be deemed to have been paid at such rate or equivalent to such amount as
   may be specified in the said notification and allow the credit  of  such
   duty in respect of the said inputs at such rates or such amount and such
   conditions as may be specified in the notification.  It is pertinent  to
   state here that the  proviso  to  the  said  Rule  stipulates  that  the
   manufacturer shall take all reasonable steps to ensure that  the  inputs
   acquired by him are goods on which the appropriate duty  of  excise,  as
   indicated in the documents accompanying the goods, has been paid.  Thus,
   what is expected of  an  assessee  is  to  take  reasonable  steps  that
   appropriate duty, as indicated in the documents, has been paid.

22. At this juncture, it is relevant to refer  to  the  notification  issued
   under sub-rule (6) of Rule 57A on 30.8.1997.  In the  said  notification
   iron and steel have been mentioned as goods notified for the purposes of
   credit of duty under MODVAT.  The relevant clauses of  the  notification
   for the present purpose are clauses 2, 4 and  5  and,  hence,  they  are
   reproduced below: -

      “2.   The Central Government further declares that the duty of  excise
      under the Central Excise Act, 1944 (1 of 1944)  (hereinafter  referred
      to as said Act), shall  be  deemed  to  have  been  paid  (hereinafter
      referred to as deemed duty), on the inputs  declared  herein  and  the
      same shall be equivalent to the  amount  calculated  at  the  rate  of
      twelve per cent of the price, as declared by the manufacturer, in  the
      invoice accompanying the  said  inputs  (hereinafter  referred  to  as
      invoice price), and credit of the deemed duty so determined  shall  be
      allowed to the manufacturer of the final products.

                           xxx         xxx         xxx       xxx
      4.    The provisions of this notification shall apply  to  only  those
      inputs which have been received directly by the  manufacturer  of  the
      final products from the factory of the manufacturer of the said inputs
      under the cover of an invoice declaring that the appropriate  duty  of
      excise has been paid on such inputs under the provisions of section 3A
      of the said Act.

      5.    The provisions of this notification shall not  apply  to  inputs
      where the manufacturer of the said inputs has not declared the invoice
      price of the said inputs correctly in the documents issued at the time
      of their clearance from his factory.”

                                              [Emphasis supplied]

23. We have referred  to  the  aforesaid  notification  in  extenso  as  the
   controversy really rests on the understanding of the  language  employed
   in the notification.
Clause (2) spells  about  the  concept  of  deemed
   payment of duty on the inputs and further prescribes that  it  shall  be
   equivalent to the amount calculated at the rate of twelve  per  cent  of
   the price, as declared by the manufacturer, in the invoice  accompanying
   the said inputs.
Clause (3) deals with a different fact situation  and,
   hence, it need not be dwelled upon.
Clauses  (4)  and  (5)  are  really
   relevant for the present purpose.
On  a  plain  reading  of  the  said
   clauses it is clear to us that there  are  two  mandates  to  avail  the
   benefit  of  the  said  notification.   One  part  is  couched  in   the
   affirmative language and the other part is in the negative.
As per  the
   first part it is obligatory on the part of the assessee to  produce  the
   invoice declaring that the appropriate duty of excise has been  paid  on
   such inputs under the provision of section 3-A of the  Act  
The  second
   command, couched in the negative, is that the  provisions  of  the  said
   notification shall not apply to inputs where  the  manufacturer  of  the
   said inputs has not declared  the  invoice  price  of  the  said  inputs
   correctly in the documents at the  time  of  their  clearance  from  his
   factory.
24. In the case at hand,
there is no dispute that a  declaration  was  given
   by the manufacturer of the inputs indicating that the  excise  duty  had
   been paid on the said inputs under the Act.  
It is also not  in  dispute
   that the said inputs were directly received from  the  manufacturer  but
   not purchased from the market.  
There is no cavil over the fact that the
   manufacturer of the inputs had declared the invoice price of the  inputs
   correctly in the documents.  
 It is perceivable from the factual  matrix
   that the only allegation is that at the time of MODVAT  verification  it
   was found that the supplier of the inputs had not discharged  full  duty
   liable for the period covered under the invoices.   
This  lapse  of  the
   seller is different and  not  a  condition  or  rather  a  pre-condition
   postulated in the notification.
25. Mr. Prasad, learned counsel for the revenue has  vehemently  urged  that
   it was requisite and, in a way imperative, on the part of  the  assessee
   to verify from the concerned authority of  the  department  whether  the
   excise duty had actually been paid or  not.   The  aforesaid  submission
   leaves  us  unimpressed.   As  we  notice
 Rule  57A  (6)  requires  the
   manufacturer of final products to take reasonable care that  the  inputs
   acquired by him are goods on which the appropriate  duty  of  excise  as
   indicated in the documents accompanying the goods, has been  paid.   
The
   notification has been issued in exercise of the  power  under  the  said
   Rule.   
The notification clearly states to  which  of  those  inputs  it
   shall apply and to which of the inputs it shall not apply  and  what  is
   the duty of the manufacturer of final inputs.  
Thus,  when  there  is  a
   prescribed procedure and that has been duly followed by the manufacturer
   of final products, we do not perceive any  justifiable  reason  to  hold
   that the assessee-appellant had not taken reasonable care as  prescribed
   in the notification.  
Due care and caution was taken by the  respondent.
   It is not stated what further care and caution could  have  been  taken.
   
The  proviso  postulates  and  requires  “reasonable   care”   and   not
   verification from the department whether the duty  stands  paid  by  the
   manufacturer-seller.   
When  all  the  conditions  precedent  have  been
   satisfied, to require the assessee to find  out  from  the  departmental
   authorities about the payment of excise duty on the inputs used  in  the
   final product which have been made allowable by the  notification  would
   be travelling beyond the notification, and in a way,  transgressing  the
   same.   
This  would  be  practically  impossible  and  would   lead   to
   transactions getting delayed.  
We may hasten to explicate that  we  have
   expressed our opinion as required in  the  present  case  pertaining  to
   clauses 4 and 5 of the notification.

26. Consequently, we concur with the view expressed by the  High  Court  and
   accordingly the appeals, being devoid of merit, stand dismissed  without
   any order as to costs.

                                                   ……………………….J.
                                                   [Anil R. Dave]

                                                   ……………………….J.
                                                   [Dipak Misra]


New Delhi
August 26, 2013

-----------------------
[1]    2003 (158) ELT 680 (P&H)
[2]    (2002) 2 SCC 127
[3]    (1997) 7 SCC 47
[4]    (1999) 6 SCC 375


No comments:

Post a Comment

Note: Only a member of this blog may post a comment.