ST: Requirement of taking "reasonable steps" does
not mean that assessee is required to verify from department whether duty
stands paid by supplier because that would be practically impossible and would
lead to transactions getting delayed; therefore, assessee is entitled to credit
even if supplier has not paid duty to department
■■■
[2013] 38 taxmann.com 336 (SC)
SUPREME COURT OF INDIA
Commissioner of Central Excise, Jalandhar
v.
Kay Kay Industries*
ANIL R. DAVE AND DIPAK MISRA, JJ.
Civil Appeal Nos. 7031, 7032 &
7034 of 2009, 7392 & 7393 of 2010 & 7148 of 2013
AUGUST 26, 2013
Rule 9, read with rule 13, of the
Cenvat Credit Rules, 2004 read with rule 57A of the Central Excise Rules, 1944
- CENVAT Credit - Documents on which credit may be taken - Period from 1-1-2000
to 31-3-2000 - Assessee took deemed Modvat Credit Notification No. 58/97-CE(NT)
on basis of invoices issued by supplier of inputs but, on verification, it was
found that supplier had not paid duty - Department opined that since rule
57A(6) required assessee to take all reasonable steps to ensure that duty has
been paid, no credit can be allowed if duty has not been paid on inputs
supplied - HELD : Supplier of inputs had, in this case, given declaration
indicating that excise duty had been paid on said inputs - Fact that supplier
had not discharged duty is a lapse of seller; it is different and not a
condition or rather a precondition postulated in Notification - When there is a
prescribed procedure and that has been duly followed by assessee, it cannot be
said that assessee had not taken reasonable steps as prescribed in notification
- Due care and caution was taken by assessee and it was not stated by
Department what further care and caution could have been taken - Requirement of
"reasonable care" does not mean verification from department whether
duty stands paid by supplier because that would be travelling beyond
notification and practically impossible and would lead to transactions getting
delayed [Paras 24 & 25] [In favour of assessee]
Circulars and Notifications :
Notification No. 58/97-CE(NT), dated 30-8-1997
FACTS
Facts
■
|
The assessee took deemed Modvat/Cenvat credit on the
strength of invoices issued by a supplier.
|
|||
■
|
During verification it was found that the supplier
of inputs had not discharged full duty liability for the period covered by
the invoices.
|
|||
■
|
The Department opined that since —
|
|||
•
|
appropriate duty of excise had not been paid by the
manufacturer of inputs under the invoices on the strength of which the
assessee took the benefit of deemed MODVAT credit and
|
|||
•
|
it was obligatory on the part of the assessee 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,
|
|||
hence, the assessee was not entitled to take Modvat/Cenvat
credit.
|
||||
Issue Involved
■
|
Whether the manufacturer of final products is
entitled to credit when the manufacturer-supplier of inputs has not paid
Central Excise Duty ?
|
HELD
Analysis of Rule 57A :
■
|
As per rule 57A, a manufacturer of final products
can avail the credit of any duty of excise or the additional duty under
section 3 of the Customs Tariff Act, 1975. [Para 20]
|
|
■
|
Sub-rule (6) of rule 57A commences with a
non-obstante clause and it empowers the Central Government to issue
notification declaring the inputs on which the duty of excise paid under
Section 3A to be deemed to have been paid at such rate or equivalent to such
amount as may be specified in the said notification and allow the credit of
such duty in respect of the said inputs at such rates or such amount and such
conditions as may be specified in the notification. The proviso to the said
Rule stipulates that the manufacturer shall take all reasonable steps to
ensure that the inputs acquired by him are goods on which the appropriate
duty of excise, as indicated in the documents accompanying the goods, has
been paid. Thus, what is expected of an assessee is to take reasonable steps
that appropriate duty, as indicated in the documents, has been paid. [Para
21]
|
Provision of Notification
No. 58/97 :
■
|
Clause (2) of Notification No. 58/97-CE(NT) dated
30.8.1997 spells about the concept of deemed payment of duty on the inputs
and further prescribes that it 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. On a plain reading of clauses
(4) and (5), it is clear that there are two mandates to avail the benefit of
the said notification -
|
||
•
|
First part (couched in the affirmative language) : As per the first part it is obligatory on the part of the
assessee to produce the invoice declaring that the appropriate duty of excise
has been paid on such inputs under the provision of section 3A.
|
||
•
|
Second part (couched in negative language) : The second command is that the provisions of the said
notification shall not apply to inputs where the manufacturer of the said
inputs has not declared the invoice price of the said inputs correctly in the
documents at the time of their clearance from his factory. [Para 23]
|
||
Notification doesn't
require assessee to verify actual payment from Department :
■
|
In the case at hand, there is no dispute that a
declaration was given by the manufacturer of the inputs indicating that the
excise duty had been paid on the said inputs under the Act. It is also not in
dispute that the said inputs were directly received from the manufacturer but
not purchased from the market. There is no cavil over the fact that the
manufacturer of the inputs had declared the invoice price of the inputs
correctly in the documents. It is perceivable from the factual matrix that
the only allegation is that at the time of MODVAT verification it was found
that the supplier of the inputs had not discharged full duty liable for the
period covered under the invoices. This lapse of the seller is different and
not a condition or rather a precondition postulated in the notification.
[Para 24]
|
|
■
|
Rule 57A (6) requires the manufacturer of final
products to take reasonable care that the inputs acquired by him are goods on
which the appropriate duty of excise as indicated in the documents
accompanying the goods, has been paid. The notification has been issued in
exercise of the power under the said Rule. The notification clearly states to
which of those inputs it shall apply and to which of the inputs it shall not
apply and what is the duty of the manufacturer of final inputs. Thus, when
there is a prescribed procedure and that has been duly followed by the
manufacturer of final products, there is no justifiable reason to hold that
the assessee had not taken reasonable care as prescribed in the notification.
Due care and caution was taken by the assessee. It is not stated what further
care and caution could have been taken. The proviso postulates and requires
"reasonable care" and not verification from the department whether
the duty stands paid by the manufacturer-seller. When all the conditions
precedent have been satisfied, to require the assessee to find out from the
departmental authorities about the payment of excise duty on the inputs used
in the final product which have been made allowable by the notification would
be travelling beyond the notification, and in a way, transgressing the same.
This would be practically impossible and would lead to transactions getting
delayed. [Para 25]
|
EDITOR'S
NOTE
■
|
The Supreme Court made it clear that (para 25) :
"We may hasten to explicate that we have expressed our opinion as
required in the present case pertaining to clauses 4 and 5 of the
notification.".
|
||||
■
|
Though the aforesaid is a rider on interpreting this
judgment, however, rule 7(2) of the erstwhile Cenvat Credit Rules, 2001/2002
and Rule 9(3) of the CENVAT Credit Rules, 2004 had, until 1-3-2007, required
assessee to take all reasonable steps to ensure that the input or capital
goods or input service in respect of which he has taken the CENVAT credit are
goods or services on which the appropriate duty of excise or service tax as
indicated in the documents accompanying the goods or relating to input service,
has been paid. The Explanation to the said rule/s provides that the
manufacturer or producer of excisable goods or provider of output service
taking CENVAT credit on input or capital goods or input service or the input
service distributor distributing CENVAT credit on input service on the basis
of, invoice, bill or, as the case may be, challan received by him for
distribution of input service credit shall be deemed to have taken reasonable
steps if he satisfies himself about the identity and address of the
manufacturer or supplier or provider of input service, as the case may be,
issuing the documents specified in sub-rule (1), evidencing the payment of
excise duty or the additional duty of customs or service tax, as the case may
be, either —
|
||||
(a)
|
from his personal knowledge; or
|
||||
(b)
|
on the basis of a certificate given by a person with whose
handwriting or signature he is familiar; or
|
||||
(c)
|
on the basis of a certificate issued to the manufacturer
or the supplier or, as the case may be, the provider of input service by the
Superintendent of Central Excise within whose jurisdiction such manufacturer
has his factory or such supplier or provider of output service has his place
of business or where the provider of input service has paid the service tax.
|
||||
and where the identity and address of the
manufacturer or the supplier or the provider of input service is satisfied on
the basis of a certificate, the manufacturer or producer or provider of
output service taking the CENVAT credit or input service distributor
distributing CENVAT credit shall retain such certificate for production
before the Central Excise Officer on demand.
|
|||||
■
|
Thus, position of law until 1-3-2007 was very
impractical and required assessee to verify actual payment from personal
knowledge/on basis of supplier's certificate or on basis of Department's
certificate.
|
||||
■
|
Presently, such requirement has been done away with
and an assessee is not expected to know whether supplier has paid duty/tax.
But the offence by way of evading revenue by issuing of fake cenvatable
invoices and taking credit based thereon fraudulently has been viewed as
serious crime and penalties under Central Excise Rules, 2002 and CENVAT
Credit Rules, 2004 along with prosecution under Section 9 of the Central
Excise Act, 1944 follow.
|
||||
CASE
REVEIW
Collector of Central Excise v. Dhiren Chemicals Industries [2002] 2 SCC
127 (para 17) distinguished.
Vikas Pipes v. CCE 2003 (158) ELT 680 (Punj & Har)
(paras 7, 9 and 26) impliedly approved.
CASES
REFERRED TO
Vikas Pipes v. CCE 2003 (158) ELT 680 (Punj & Har)
(para 5), Collector of Central Excise v. Dhiren Chemicals Industries
[2002] 2 SCC 127 (para 7), Collector of Central Excise v. Usha Martin
Industries [1997] 7 SCC 47 (para 10) and Matiram Tolaram v. Union
of India [1999] 6 SCC 375 (para 10).
JUDGMENT
Dipak Misra, J. - Leave granted in Special Leave Petition (C) No. 26499
of 2008.
2. The controversy that emerges for consideration in
this batch of appeals, being consubstantial, was heard together and is disposed
of by a common judgment. For the sake of convenience the facts from Civil
Appeal No. 7031 of 2009 are set out herein.
3. The respondent-company availed deemed MODVAT credit
of Rs.77,546/- during the quarter of March, 2000 on the strength of invoices
issued by M/s. Sawan Mal Shibhu Mal Steel Re-Rolling Mills, Mandi Govindgarh.
During MODVAT verification it was found that the supplier of inputs had not
discharged full duty liability for the period covered by the invoices. 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 credit of deemed duty paid by the manufacturer
under Section 3A of the Central Excise Act, 1944, (for brevity "the
Act") was available subject to the condition that the inputs were received
directly from the factory of manufacturer under cover of an invoice declaring
therein that the appropriate duty of excise had been paid on such inputs under
the provisions of the Act. The appellate authority referred to the provisions
of sub-rule (6) of Rule 57A and notification No. 58/97-CE(NT) dated 1.9.1997
and opined that the manufacturer of the inputs had not discharged the
appropriate duty liability against the goods cleared vide the invoices and the
respondent had not furnished the requisite documentary evidence which could
controvert the said allegation made against the manufacturer of inputs. The
appellate authority observed that unless and until payment of appropriate duty
had been made, the assessee could not have availed the benefit. Expressing such
an opinion, it concurred with the view taken by the adjudicating authority.
However, it reduced the penalty from Rs.40,000/- to Rs.20,000/-.
5. The unsuccess in appeal compelled the respondent to
prefer Appeal No. E/1474/04-SM before the Customs, Excise and Service Tax
Appellate Tribunal (for short "the tribunal") and the tribunal
placing reliance on the decision in Vikas Pipes v. CCE 2003 (158)
ELT 680 (Punj & Har) came to hold that the declaration given by the
appellant therein satisfied the conditions enumerated in the notification for
claiming the deemed MODVAT credit and, accordingly, quashed the orders passed
by the adjudicating authority and that of the appellate authority.
6. Questioning the justifiability of the aforesaid
order, Revenue preferred Civil Appeal No. 65 of 2006 before the High Court. The
High Court reproduced the proposed substantial question of law which reads as follows:—
"Whether the manufacturer of final products is
entitled to deemed credit, under Notification 58/97-CE dated 30.8.97 when the
manufacturer-supplier of inputs has not paid Central Excise Duty and given a
wrong certificate on the body of invoices about duty dischargement under Rule
96ZP of Central Excise Rules, 1944?"
7. While dealing with the aforesaid substantial question
of law, the High Court referred to its earlier decision in Vikas Pipes (supra)
and distinguished the decision in Collector of Central Excise v. Dhiren
Chemicals 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 relied upon the decision in Vikas Pipes
(supra) and correctly opined that the respondent had satisfied the
conditions enshrined in the notification and, therefore, there was no warrant
to proceed for recovery of the benefit availed of by the final manufacturer.
The learned counsel would submit that the "appropriate duty", as interpreted
by this Court in Dhiren Chemical Industries (supra), supports the
case of the respondent and the conditions prescribed in the notification having
been satisfied, the adjudicating authority as well as the first appellate
authority has erred in holding that there was a failure on the part of the
respondent to satisfy the conditions.
10. To appreciate the rival submissions raised at the Bar
and the bold assertion by Mr. Prasad, learned counsel for the Revenue, that it
was the duty of the assessee-respondent, the manufacturer of the final
products, to see that the manufacturer of the inputs had actually paid the
appropriate duty on the inputs on the bedrock of law laid down by the
Constitution Bench in Dhiren Chemical Industries (supra), it is
necessary to understand how and under what circumstances the controversy
travelled to the Constitution Bench. Be it noted, the Constitution Bench was
required to resolve the conflict between the two pronouncements, namely, Collector
of Central Excise v. Usha Martin Industries [1997] 7 SCC 47 and Matiram
Tolaram v. Union of India [1999] 6 SCC 375.
11. In Usha Martin Industries (supra) the
Court was interpreting the exemption notification dated 30.11.1963 as amended
on 7.4.1981 and the question before the three learned Judges was whether the
benefit of excise duty exemption (granted by the Central Government as per
certain notifications) could be claimed in respect of commodities made out of
raw material on which no excise duty was payable. The Central Government had exempted
iron or steel products falling under a particular category made from certain
materials or combination thereof. One of them was fresh unused re-rollable
scrap on which the appropriate amount of duty of excise had already been paid.
The Bench adverted to various aspects and, eventually, came to hold that the
duty could legitimately be claimed by the assessee in respect of those goods
referred to in the notification under consideration the raw material of which
were not exigible to any excise 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 before the
Court that the appellants were manufacturing that item in India from vinyle
acetate monomer on which appropriate duty of excise had been paid and,
therefore, the concessional duty should be charged from them. The learned
Judges referred to the language employed in the exemption notification and
opined that onus was on the assessee to prove and show that the conditions, as
imposed in the exemption notification, had been satisfied. In that context the
Bench proceeded to state that the condition for getting the benefit of the
lower rate of duty is that on the raw material used appropriate amount of duty
has been paid. If perchance or for any reason, the manufacturer of polyvinyl
alcohol in India is unable to prove or show that the same has been manufactured
from vinyl acetate monomer on which appropriate amount of duty of excise has
been paid, then the said manufacturer would not be entitled to get the benefit
of the said notification.
13. Thereafter, the Court referred to Section 3 of the
Customs Tariff Act, 1975 and observed that one has to assume that the importer
of polyvinyl alcohol had actually manufactured the same in India. One can
further assume, possibly without any difficulty, that the said polyvinyl
alcohol has been manufactured from vinyl acetate monomer, but it is not
possible to assume or presume or imagine that the raw material used is the one
on which appropriate amount of duty of excise has been paid in India and hence,
the condition which is contained in the said notification has to be fulfilled
in order to get the benefit of the notification.
14. The Court further stressing on the purpose of the
notification expressed thus: —
"11. It appears to us that Excise Notification
No. 185 of 1983 was deliberately worded in such a way that the importer of
polyvinyl alcohol, who may not be able to prove that on the raw material
appropriate duty in India has been paid, will not be able to get the benefit of
the concessional rate of duty. It has to be borne in mind that the normal duty
which is payable on polyvinyl alcohol is 40%. That is the rate of excise duty
which would be payable by an Indian manufacturer of polyvinyl alcohol who is
unable to show that he has complied with the condition contained in the
proviso, namely, use in the manufacture of vinyl acetate monomer on which
appropriate amount of duty has been paid. Similarly an 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 Martin Industries (supra) and Motiram Tolaram
(supra) and, eventually, opined thus: —
'6. In the case of Motiram Tolaram (supra)
reliance was placed upon the case of Usha Martin Industries (supra)
to contend that the appropriate duty being nil, because the raw material was
not manufactured in India, it must be taken that appropriate duty had been paid
and the appellants would be entitled to the benefit of the exemption
notification in question, which used the said phrase. The Court was unable to
agree. It said that the raw material being an item which was manufactured in
India, a rate of excise duty was leviable thereon. On the raw material which
had been imported, the appropriate amount of duty had not been paid. It was
only if this payment had been made that the exemption notification would be
applicable.
7. In our view, the correct interpretation of the said
phrase has not been placed in the judgment in the case of Usha Martin
Industries (supra). The stress on the word "appropriate"
has been mislaid. All that the word "appropriate" in the context
means is the correct or the specified rate of excise duty.
8. An exemption notification that uses the said phrase
applies to goods which have been made from duty-paid material. In the said
phrase, due emphasis must be given to the words "has already been
paid". For the purposes of getting the benefit of the exemption under the
notification, the goods must be made from raw material on which excise duty
has, as a matter of fact, been paid, and has been paid at the
"appropriate" or correct rate. Unless the manufacturer has paid the
correct amount of excise duty, he is not entitled to the benefit of the
exemption notification.'
17. At this juncture, we are obliged to state that the
factual and legal matrix in the case at hand is quite different. The decision
proceeded on the language of the notifications. Moreover, we are not dealing
with a notification for exemption. The controversy pertains to the
interpretation of the notification No. 58/97-CE dated 30.8.1997 which has been
issued in exercise of powers conferred by sub-rule (6) of Rule 57A of the Rules
dealing with availing of MODVAT credit under certain circumstances subject to
satisfaction of certain conditions precedent.
18. Before we advert to the notification it is necessary
to refer to Rule 57A(1) and (6). The relevant part of Rule 57A(1) reads as
follows: —
"57A. Applicability. — (1) The provisions
of this section shall apply to such finished excisable goods (hereinafter
referred to as the 'final products') as the Central Government may, by
notification in the Official Gazette, specify in this behalf, for 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 paid under section 3A
of the Central Excise Act, 1944 (1 of 1944), shall be deemed to have been paid
at such rate or equivalent to such amount as may be specified in the said
notification, and allow the credit of such duty in respect of the said inputs
at such rates or such amount and subject to such conditions as may be specified
in the said notification:
Provided that the manufacturer shall take all
reasonable steps to ensure that the inputs acquired by him are goods on which
the appropriate duty of excise as indicated in the documents accompanying the
goods, has been paid under section 3A of the Central Excise Act, 1944 (1 of
1944)." [Emphasis supplied]
20. On a careful reading of Rule 57A(1), it is clear as
crystal that a manufacturer of final products can avail the credit of any duty
of excise or the additional duty under Section 3 of the Customs Tariff Act,
1975, as may be specified by the notification in the Official Gazette subject
to provisions of the Section and the conditions and restrictions that may be
specified in the notification. The proviso further stipulates that the Central
Government may specify the goods or classes of goods in respect of which the
credit of specified duty may be restricted. Thus, the conditions and restrictions
have been left to be prescribed by way of notification in respect of certain
classes of goods.
21. Sub-rule (6) of Rule 57A commences with a
non-obstente clause and it empowers the Central Government to issue
notification declaring the inputs on which the duty of excise paid under
Section 3A of the Act to be deemed to have been paid at such rate or equivalent
to such amount as may be specified in the said notification and allow the
credit of such duty in respect of the said inputs at such rates or such amount
and such conditions as may be specified in the notification. It is pertinent to
state here that the proviso to the said Rule stipulates that the manufacturer
shall take all reasonable steps to ensure that the inputs acquired by him are
goods on which the appropriate duty of excise, as indicated in the documents
accompanying the goods, has been paid. Thus, what is expected of an assessee is
to take reasonable steps that appropriate duty, as indicated in the documents,
has been paid.
22. At this juncture, it is relevant to refer to the
notification issued under sub-rule (6) of Rule 57A on 30.8.1997. 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.
**
|
**
|
**
|
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 of section 3A of the said Act.
5. The provisions of this notification shall not
apply to inputs where the manufacturer of the said inputs has not declared the
invoice price of the said inputs correctly in the documents issued at the time
of their clearance from his factory." [Emphasis supplied]
23. We have referred to the aforesaid notification in
extenso as the controversy really rests on the understanding of the language
employed in the notification. Clause (2) spells about the concept of deemed
payment of duty on the inputs and further prescribes that it 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. Clause (3) deals with a different fact situation and, hence, it need
not be dwelled upon. Clauses (4) and (5) are really relevant for the present
purpose. On a plain reading of the said clauses it is clear to us that there
are two mandates to avail the benefit of the said notification. One part is
couched in the affirmative language and the other part is in the negative. As
per the first part it is obligatory on the part of the assessee to produce the
invoice declaring that the appropriate duty of excise has been paid on such
inputs under the provision of section 3-A of the Act The second command,
couched in the negative, is that the provisions of the said notification shall
not apply to inputs where the manufacturer of the said inputs has not declared
the invoice price of the said inputs correctly in the documents at the time of
their clearance from his factory.
24. In the case at hand, there is no dispute that a
declaration was given by the manufacturer of the inputs indicating that the
excise duty had been paid on the said inputs under the Act. It is also not in
dispute that the said inputs were directly received from the manufacturer but
not purchased from the market. There is no cavil over the fact that the
manufacturer of the inputs had declared the invoice price of the inputs
correctly in the documents. It is perceivable from the factual matrix that the
only allegation is that at the time of MODVAT verification it was found that
the supplier of the inputs had not discharged full duty liable for the period
covered under the invoices. This lapse of the seller is different and not a
condition or rather a pre-condition postulated in the notification.
25. Mr. Prasad, learned counsel for the revenue has
vehemently urged that it was requisite and, in a way imperative, on the part of
the assessee to verify from the concerned authority of the department whether
the excise duty had actually been paid or not. The aforesaid submission leaves
us unimpressed. As we notice Rule 57A (6) requires the manufacturer of final
products to take reasonable care that the inputs acquired by him are goods on
which the appropriate duty of excise as indicated in the documents accompanying
the goods, has been paid. The notification has been issued in exercise of the
power under the said Rule. The notification clearly states to which of those
inputs it shall apply and to which of the inputs it shall not apply and what is
the duty of the manufacturer of final inputs. Thus, when there is a prescribed procedure
and that has been duly followed by the manufacturer of final products, we do
not perceive any justifiable reason to hold that the assessee-appellant had not
taken reasonable care as prescribed in the notification. Due care and caution
was taken by the respondent. It is not stated what further care and caution
could have been taken. The proviso postulates and requires "reasonable
care" and not verification from the department whether the duty stands
paid by the manufacturer-seller. When all the conditions precedent have been
satisfied, to require the assessee to find out from the departmental
authorities about the payment of excise duty on the inputs used in the final
product which have been made allowable by the notification would be travelling
beyond the notification, and in a way, transgressing the same. This would be
practically impossible and would lead to transactions getting delayed. We may
hasten to explicate that we have expressed our opinion as required in the
present case pertaining to clauses 4 and 5 of the notification.
26. Consequently, we concur with the view expressed by
the High Court and accordingly the appeals, being devoid of merit, stand
dismissed without any order as to costs.
*In favour of assessee.
Comments
Post a Comment