2008 (2) TMI 879 - HC - Central Excise

Whether the manufacturer of final products is entitled to deemed credit under N/N. 58/97-CE dated 30-8-1997 when the manufacturer-supplier of inputs has not paid appropriate Central Excise duty and given a wrong certificate/no certificate on the body of invoices about duty discharged under Rule 96ZP of the erstwhile CER 1944?

Summary

Issues:
Appeal under Section 35G of the Central Excise Act, 1944 challenging deemed credit entitlement under Notification 58/97-CE.

Analysis:
The appeal was filed by the Department/Revenue under Section 35G of the Central Excise Act, 1944, challenging the order dated 29-12-2006 passed by the Customs, Excise & Gold (Control) Appellate Principal Bench, New Delhi. The appeal raised a substantial question of law regarding the entitlement of the manufacturer of final products to deemed credit under Notification 58/97-CE dated 30-8-1997, specifically when the manufacturer-supplier of inputs did not pay appropriate Central Excise duty and provided a wrong certificate or no certificate on the invoices. The respondent, a registered manufacturer availing deemed Modvat credit facility, faced a Show Cause Notice proposing recovery of deemed credit along with interest and penalties due to discrepancies in duty liability discharge by the manufacturer of inputs. The adjudicating authority disallowed modvat credit for a specific period, ordered recovery, and imposed penalties. The respondent appealed this order, which was allowed by the Commissioner (Appeals) Central Excise, Jalandhar. Subsequently, the revenue filed an appeal before the Tribunal, which was dismissed based on a precedent judgment and the principle that credit cannot be denied based on the duty payment status of the manufacturer of inputs. The Tribunal emphasized that any dispute regarding duty payment should be addressed by proceeding against the manufacturer, not the recipient of credit. The High Court, after hearing arguments, dismissed the appeal as no substantial question of law arose based on a previous judgment that had already answered the question against the revenue.