2006 (11) TMI 502 - AT - Central Excise

Tribunal allows appeal, clarifies duty payment and credit rules, emphasizes documentary evidence

The Tribunal set aside the order confirming duty demand and penalty imposition, allowing the appeal with consequential relief. The judgment clarified that ... Cenvat/Modvat - Quantum of credit Issues:- Denial of Modvat credit on excess excise duty.- Dispute over payment of excise duty by the supplier.- Confirmation of duty demand and penalty imposition.Analysis:Issue 1: Denial of Modvat credit on excess excise dutyThe appellant availed Modvat credit on furnace oil purchased from Indian Oil Corporation, which indicated excise duty at 16%. However, a show cause notice was issued for denying Modvat credit due to excess excise duty collected. The appellant argued that they paid the total amount to the supplier as per the invoice. The adjudicating authority and Commissioner (Appeals) upheld the demand and penalty. The appellant contended that the duty liability was discharged by the supplier, as evidenced by subsequent payments made by Indian Oil Corporation.Issue 2: Dispute over payment of excise duty by the supplierThe appellant submitted that Indian Oil Corporation paid the total duty amount calculated from duty paying documents for a specific period and issued a certificate to that effect. The appellant emphasized that the duty payment was certified by the Superintendent of Central Excise. The Department, however, maintained that Modvat credit cannot be availed if the duty is not paid by the supplier at the time of goods clearance.Issue 3: Confirmation of duty demand and penalty impositionUpon considering submissions and records, it was found that the appellant had paid the amount indicated in the invoice to the supplier. The Tribunal noted that when the duty amount on the invoice is paid by the appellant, credit cannot be denied due to the supplier's duty liability. The Tribunal observed that Indian Oil Corporation had issued certificates verifying the payment of differential duty, relieving the appellant from denial of Modvat credit. Consequently, the impugned order confirming duty demand and penalty imposition was set aside, allowing the appeal with consequential relief.This judgment clarifies the principles governing Modvat credit, emphasizing that payment by the appellant as per the invoice suffices for credit, even if the supplier later pays the duty directly. The Tribunal's decision underscores the importance of documentary evidence and certification in resolving disputes over duty payment and Modvat credit entitlement.