LexCOMMISSIONER OF CENTRAL EXCISE, JALANDHAR versus M/S. KAY KAY INDUSTRIES
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[2013) 9 S.C.R. 623 COMMISSIONER OF CENTRAL EXCISE, JALANDHAR v. MIS. KAY KAY INDUSTRIES (Civil Appeal No. 7031 of 2009) AUGUST 26, 2013 [ANIL R. DAVE AND DIPAK MISRA, JJ.] CENTRAL EXCISE RULES, 1944: A B rr. 57-A(4) and (5) read with r.57-A(6) and (1) - c Notification No. 58197-CE(NT) dated 1.9.1997·- Deemed MODVAT credit - Claimed by manufacturer of final product - Adjudicating authority and appellate authority ordered recovery of the amount on the ground that the supplier of inputs had not discharged full duty liability - Held: In the 0 instant case,. a declaration was given by manufacturer of inputs indicating that excise duty had been paid on the said inputs under the Act - Further, the said inputs were directly received from manufacturer and not purchased from the market - When the prescribed procedure has been duly E followed by assessee-manufacturer of final products, it cannot be said that the assessee has not taken reasonable care as prescribed in the notification - Orders of adjudicating authority and appellate authority rightly quashed by Tribunal and High Court - Notification No. 58197-CE (NT) dated 1.9.1997 - F Clause (6) - Customs Tariff Act, 1975 - s. 3- Central Excise Act, 1944. s.57-A(6), Proviso - Credit of duty of excise or additional duty- Held: The proviso postulates and requires "reasonable care» and not verification from the department whether the duty G stands paid by the manufacturer-seller. The respondent-company (in Civil Appeal No. 7031 of 2009) availed deemed MODVAT credit of Rs.77,546/- 623 H 624 SUPREME COURT REPORTS [2013] 9 S.C.R. A during the quarter of March, 2000 on the strength of invoices issued by the manufacturer supplier of inputs. 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 deemed MODVAT B benefit availed was disallowed. Recovery of the said sum along with interest and a penalty of Rs.40,000/- was ordered. The Commissioner (Appeals), Central Excise concurred with the view taken by the adjudicating authority, but reduced the penalty from Rs.40,000/- to c Rs.20,000/-. The Customs, Excise and Service Tax Appellate Tribunal held that the ct.!claration given by the appellant satisfied the conditions for claiming the deemed MODVAT credit and, accordingly, quashed the orders passed by the adjudicating authority and that of the 0 appellate authority. The High Court dismissed the appeal of the Revenue. Dismissing the appeals, the Court HELD: 1.1. Rule 57A (1) of the Central Excise Rules, E 1994 makes it clear that a manufacturer of final products can avail the credit of any duty of excise or the additional duty u/s. 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 F 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 G been left to be prescribed by way of notification in respect of certain classes of goods. [Para 20] [636-F-H; 637-A] 1.2. Sub-r. (6) of r. 57 A commences with a non- obstente clause and it empowers the Central Government H to issue notification declaring. the inputs on which the COMMISSIONER OF CENTRAL EXCISE, JALANDHAR v. 625 KAY KAY INDUSTRIES duty of excise paid u/~. 3A of the Act to be deemed to A 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 B 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, an assessee is expected to take c reasonable steps that appropriate duty, as indicated in the documents, has been paid. [Para 21] [637-B-D] 1.3. Clause (2) of the Notification No. 58/97-CE (NT) dated 1-9-1997 issued under sub-r. (6) of r.57 A spells about the concept of deemed payment of duty on the D inputs and further prescribes that it shall
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