2008 (2) TMI 220 - HC - Central Excise

Appellant entitled to credit based on invoice amount, not full duty paid by manufacturer. Court dismisses appeal.

SRI KALAIVANI SPINNERS (P) LIMITED Versus CESTAT, CHENNAI

The High Court held that the appellant was only entitled to take credit based on the amount reflected in the invoice issued by the company from which the ... Appellant purchased capital goods from M/s.Vairava Textiles, who had purchased the same from manufacturer of machines - Whether appellant can take credit of duty originally paid by manufacturer - in the invoice issued by M/s.Vairava, the credit availed was only 50 percent of the duty paid by original manufacturer, hence appellant are not entitled to take entire amount of duty paid by original manufacturer but was entitled to take credit of amount which M/s.Vairava incorporated in invoice Issues:Interpretation of 'Duty' under CENVAT Credit Rules, 2001Entitlement to take credit of excise duty paid by the manufacturerAnalysis:1. The appellant purchased capital goods from a company that had availed 50% of the duty paid by the manufacturer in the same financial year. The appellant claimed credit on the duty paid by the manufacturer in two different financial years. The authorities rejected this claim and imposed a penalty.2. The Tribunal upheld the rejection of the claim for 100% modvat credit but deleted the penalty, considering the appellant's belief in entitlement to the claim. The appellant challenged the Tribunal's order in this appeal.3. The High Court examined the provisions of Rule 57AE(1)(h) which require the manufacturer of final products to pay appropriate excise duty on capital goods removed from the factory. The Court noted that the invoice issued by the company from which the appellant purchased the capital goods only reflected 50% of the duty paid by the original manufacturer.4. The Court concluded that the appellant was only entitled to take credit based on the amount reflected in the invoice issued by the company from which the capital goods were purchased. As the invoice showed only 50% of the duty paid by the manufacturer, the appellant could not claim the entire duty paid by the manufacturer.5. Consequently, the High Court dismissed the Civil Miscellaneous Appeal, stating that no question of law was involved in the case. The Court also dismissed the connected application without any order as to costs.