Case Law Details
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/-.
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.
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
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Sir, I need some guidance and help from the learned people here.
Can a buyer avail cenvat credit without paying excise duty to the seller? If I can reword my question this way – Is it not mandatory for a buyer to pay the excise duty to seller for availing the cenvat credit?
My customer which is SAIL, Bokaro Steel Plant has a clause in Purchase Order which says – Any increase in Excise Duty for supplies made after the scheduled delivery period of PO, will be borne by the seller. That is, if I delay in supply, they will purchase the material but will not pay the increased Excise Duty. In my case, in 2003 & 2004 the ED rate in PO was 9.6%. But when the ED rate changed to 16%, they did not pay 16% but only paid me 9.6%. They say it is as per the terms of PO. But when they availed cenvat of 16%, is it not illegal for them to pay only 9.6% to me? Are there any judgements which can strengthen my case?
This judgement has no direct relevance in current law after the unpractical condition of taking reasonable steps provided under Rule 9(3) of Cenvat Creidt Rules, 2004 (earlier Proviso to Rule 57A(6) of Central Excise Rules, 1944) was omitted vide N/No. 10/2007 CE (NT) dated 01-03-2007.
This is nothing but harassing the Trade. When a manufacturer has availed CENVAT credit on the strength of a valid Central Excise invoice issued by the supplier, which is authenticated document for taking credit as per Central Excise Act., how can the department dis-allow such credit? If it is proved that the supplier has not discharged the duty liability, he is the defaulter and he is liable for punishment under C.E.Act., for evading the Central Excise Duty. Also, it is practically impossible to the manufacturers those who are availing CENVAT Credit to verify each invoice whether the supplier has discharged duty liability or not. In respect of some manufacturers the number of input invoices will be in thousands in a financial year and that too from different parts of the country.
This un-necessary trouble to the trade is due to mis-interpretation of the wordings of the Act.,Rules, Notifications, Circulars and Trade Notices by the implementing authorities (lower authorities)due to the fear that the Department will fix the responsibility on them if there is any loss of revenue and therefore they always decide the issues in favour of department only though they know very well that their decision is wrong and in-justice. This results to prefer an appeal. At last The Hon’ble Supreme Court has to decide the correct interpretation of such orders.
It is better if CBEC explain very clearly in each Notification, and every order issued by them about the applicability of such order(i.e., YES/NO) so that it should not be mis-interpreted by the lower authorities and cause trouble to the trade.
This judgement was delivered on 26.8.2013.
NO USE OF UNNECESSARILY FIRST COLLECT TAX THEN REFUND OR ALLOW CREDIT – MAKE COLLECTION MORE LOGICAL AND MEANINGFUL
I had written several articles on concept that the policy of first collect then refund is not always proper and it is amenable of revenue leakage. However, over a period of time government has kept such policies and also widened scope of provisional collections in which un-necessary procedures for collection, recording, allowing credit or refund are involved.
A person who receives a payment after levy of a tax or after deduction of a tax cannot be supposed to check that the person who has raised bill with levy of tax or who has made payment after TDS has in fact deposited the tax levied or tax deducted in treasury.
Large size of organizations e.g. MARUTI , TATA STEEL, TATA MOTORS, RELIANCE IND…. who have substantial amount of tax or duty payable (even after CENVAT credit) can be exempted from payment of tax or duty on input goods and services and instead can pay full amount of tax or duty. For example if a manufacturer say M has duty payable of say Rs.500 crore, and he get CENVAT credit of say Rs.50 crore and then pay net Rs.450 crore per month. An exemption can be granted to effect that all supplies and services to M will be exempt and THEN M will have to pay full duty(Rs.450 crore) because therei will be no CENVAT since suppliers and service providers had not charged excise or service tax to M. This will simplify work of M, his thousands of suppliers and , service providers and excise and service tax department from monitoring levy of tax by suppliers and service providers..
Suppose out of Rs.50 crore of tax on inputs of M, there is default of say Rs.15 crore by some of suppliers and service providers who have not deposited tax or duty. How M can be held responsible for such default. M has paid amount including tax and duty of Rs.15 crore to suppliers and service providers, he cannot be held responsible for default of his suppliers and service providers.
In this case if exemption, as suggested is allowed to M, then M will be responsible to pay entire amount of tax and duty on his taxable goods manufactured and / or taxable services rendered.
However, it appears that government only want to increase work and keep its bureaucracy , including teams of inspectors and clerk un-necessarily busy and powerful at several unnecessary point of tax administration where even petty functionaries can be a reason of harassment and corruption.