TaxTMI 
TaxTMI 
2013 (8) TMI 772
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....oices. 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 credi....
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....Dhiren Chemical Industries (2002) 2 SCC 127 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 relie....
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....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 b....
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....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, bec....
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....r 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 pa....
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..... 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....