Tribunal denies deemed credit for non-compliance with Notification No. 58/97-C.E.

The Tribunal, consisting of Ms. Jyoti Balasundaram and Shri Moheb Ali M., held that the respondents were not eligible for deemed credit on inputs due to non-compliance with Notification No. 58/97-C.E. requirements. The Tribunal set aside the credit granted but upheld the decision to cancel penalties imposed, partially allowing the appeals. Compliance with eligibility criteria, including proper documentation and payment methods, is crucial for lawfully claiming benefits like Modvat Credit.

---

---

Issues: Revenue appeal against Commissioner (Appeals) order granting deemed credit on inputs received; Eligibility criteria under Notification No. 58/97-C.E. for availing Modvat Credit; Lack of declaration on invoice regarding excise duty payment and payment evidence through cheque.

In the judgment, the Appellate Tribunal CESTAT, Mumbai, consisting of Ms. Jyoti Balasundaram, Vice-President, and Shri Moheb Ali M., Member (T), addressed the appeal by the Revenue against the order of the Commissioner (Appeals) granting deemed credit on inputs received by the respondents. The Tribunal noted that as per Notification No. 58/97-C.E., an assessee can avail Modvat Credit on inputs received directly from the manufacturer's factory under certain conditions. These conditions include the declaration of excise duty payment under Section 3A of the Central Excise Act on the invoice and payment made through a cheque from the assessee's bank account to the manufacturer. However, in this case, the invoice used for claiming deemed credit did not bear the required declaration, and there was no evidence provided that the payment was made through a cheque drawn on the assessee's bank account to the manufacturer. Consequently, the Tribunal agreed with the ld. SDR that the respondents were not eligible for the credit solely based on the payment made through a cheque.

The Tribunal held that the respondents were not entitled to the deemed credit at the rate of 12% of the invoice price as per the mentioned Notification. They set aside the order extending the benefit of deemed credit to the respondents amounting to Rs. 13,68,690. However, the Tribunal upheld the part of the order that set aside the penalties imposed, thereby allowing the appeals partly. The judgment underscores the importance of complying with the specific eligibility criteria outlined in the relevant notifications for availing benefits such as Modvat Credit, emphasizing the necessity of fulfilling all conditions, including proper documentation and payment methods, to claim such credits lawfully.

---