In the High Court for the States of Punjab and Haryana at Chandigarh … CEA No.65 of 2007 Date of decision:28.1.2008 The Commissioner of Central Excise Ludhiana ..Appellant Versus M/s Namdev Pipes Ltd. .. Respondent Coram: Hon’ble Mr.Justice Satish Kumar Mittal Hon'ble Mr.Justice Rakesh Kumar Garg Present: Mr.Sanjiv Kaushik, Advocate for the appellant-revenue. .. Rakesh Kumar Garg,J 1. The instant appeal has been filed by the Department/ Revenue under Section 35 G of the Central Excise Act, 1944 challenging the order dated 24.8.2006 (Annexure P-3) passed by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi by raising the following substantial questions of law:- “1.Whether the Tribunal is correct in holding that Commissioner (Appeals) has traversed beyond the show cause notice when the certificate required under Notification 58/97-CE (NT) dated 30.8.97 required duty payment and the same was not found discharged? 2.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 discharged under Rule 96ZP of Central Excise Rules, 1944?” 2. The brief facts of the case are that the respondent M/s Namdev Pipes Ltd., Nabha Road, Bhawanigarh is registered with the Central Excise Range, Sangrur under the Central Excise Act, 1944 (hereinafter referred to as the Act) and is manufacturing excisable goods, i.e., M.S. Pipes falling under chapter heading 7306.90 of the Central Excise Tariff Act, 1985 (5 of 1986). M.S. Flats/Bars are the principal raw material used by the respondent for the manufacture of M.S. conduit pipes. These inputs are purchased by them from the Hot Re-rolling Mills working under Section 3A of the Central Excise Act, 1944. The respondent is availing deemed Modvat credit facility on inputs,i.e., M.S. Flats/Bars under Notification No.58/97-CE(N.T.) dated 30.8.97. However, the deemed Modvat credit is only admissible subject to certain conditions provided as under: - “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.” Further proviso to sub-Rule (6) of Rule 57A of the Central Excise Rules, 1944 provides as under:- “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.” 3. On scrutiny of RT-12 Returns & purchase invoices of M.S.Flats/Bars for the period from 10.9.98 to 31.12.98 on which the respondent had availed deemed Modvat Credit revealed that many of the invoices did not contain the requisite declaration at the time of clearance of said inputs by the manufacturer that appropriate duty has been paid on such inputs under Section 3A of the said Act and the few invoices contained that the duty is to be discharged under the said Rules. 4. A show cause notice was served on the respondent for recovery of wrongly availed modvat credit of Rs.151703/- under Rule 57 I of Central Excise Rules, 1944 along with interest under Section 11 AA of Central Excise Act,1944 read with Rule 57 1(3) of the Rules and for imposition of Personal Penalty on the respondent under Rule 173 Q for contravening the provisions of Rule 57 A (6) of the Central Excise Rules,1944. 5. The respondent filed reply vide his letter dated 19.5.1999 to the show cause notice stating therein that the deemed modvat credit has been availed correctly and no provision of law has been violated. Therefore, the show cause notice has been issued illegally. 6. The adjudicating authority vide its order dated 29.5.2000 confirmed the demand of Rs.38153/- against the respondent under Rule 57-I of the Central Excise Rules, 1944 and imposed a penalty of Rs.4000/- under Rule 173 Q of the Rules and also ordered the respondent to pay interest in terms of Section 11 AA of the Central Excise Act, 1944 read with erstwhile sub-Rule (3) of Rule 57-I of Central Excise Rules, 1944. The relevant portion of the order of the adjudicating authority is reproduced hereinafter below: - “Regarding admissibility of Modvat Credit on invoice issued by the manufacturer of inputs mentioned at Serial No. (3) above namely, M/s Prince Agro & Allied Industries, Mandi Gobindgarh. I find that the invoice on the strength of which deemed Modvat Credit has been taken by the Notices has been issued, during the month Sep. 1998. Regarding declaration of payment of duty, the invoice issued by the manufacturer of inputs contains the following words “: Goods cleared under Rule 96ZP”. As per para 4 of Notification No.58/97-CE dated 30.8.97 as amended, issued under Sub-Rule (6) of Rule 57-A of the Rules deemed Modvat Credit is admissible if the inputs are received under the cover of an invoice declaring that the appropriate duty of excise has been paid on such inputs under provisions of Section 3A of the Act. The invoice on the basis of which deemed Modvat Credit has been taken does not indicate that appropriate duty of excise has been paid under Section 3A of the Act. Even the certificate issued by the jurisdictional Range Superintendent of the manufacturer of inputs submitted before me does not indicate that the manufacturer of inputs has paid appropriate duty of excise under Section 3A of the Act. It indicates that the party is working under Section 3 A and they have deposited duty amounting to Rs.319436/- during the month Sep. 1998 against duty liability of Rs.638872/- fixed for the month Sep., 1998 and thus, payment of the balance duty amounting to Rs.319436/- has been deferred. From the above, it is clear that the supplier (Manufacturer) of inputs has not paid the appropriate duty of Excise as determined by the Commissioner under Section 3A of the Act. Consequently, the Notices has taken deemed Modvat Credit on inputs on which appropriate duty of excise as required under Section 3A of the Act read with para 4 of Notification No.58/97-CE (NT) dated 30.8.97, has not been paid by the manufacturer of inputs. The Notices, therefore, failed to take all reasonable steps to the effect that the inputs received by them are appropriately duty paid as required under the proviso to sub rule (6) of Rule 57A of the Rules. Therefore, the invoice issued by the manufacturer of inputs namely M/s Prince Agro & Allied Industries, Mandi Gobindgarh on the strength of which the notices has taken deemed Modvat Credit of Rs.38153/- and on which there is no declaration declaring that appropriate duty of excise has been paid on inputs under section 3A of the Act, is not a valid document for availing deemed Modvat Credit and I disallow the same. By not taking reasonable steps as required under the proviso to Sub Rule (6) of Rule 57A of the rules, the Notices has taken deemed Modvat Credit in contravention of Rule 57A (6) of the Rule read with Notification No.58/97 CE (NT) dated 30.8.97 and thus the Noticee has rendered itself for penal action under Rule 173 Q of the Rules. 7. Keeping in view the above discussions and findings, I pass the following order:- ORDER I confirm the demand for Rs.38, 153/- (Rupees thirty eight thousand one hundred fifty three only) against the Notices under Rule 57-1Central Excise Rules, 1944. I impose personal penalty of Rs.4000/- (Rupees Four thousand only) upon the notices under Rule 173 Q of the Rules. I also order the noticee to pay interest in terms of Section 11AA of the Central Excise Act, 1944 read with erstwhile sub- Rule (3) of Rule 57-I of Central Excise Rules,1944. I allow Modvat Credit and vacate the demand for Rs.113550/- raised against the Noticee.” 8. Against the order dated 29.5.2000 passed by the adjudicating authority, the respondent filed an appeal before the Commissioner (Appeals) Central Excise, Ludhiana, which was dismissed vide order dated 29.8.2003. While dismissing the appeal of the assessee/ respondent, the Commissioner (Appeals) held as under: - “ I have gone through the facts of the case, the Deputy Commissioner, Central Excise Division, Mandigobindgarh has also confirmed vide C.No. V (172) T-V/Msic./i/2002/1851 Dt.22.7.2003 that M/s Prince Agro & Allied Industries had not discharged their full duty liability for the year 1998-99 as determined by the Commissioner under Rule 96 ZP (3). They have deferred duty amounting to Rs.1921810/- for the said period. As per Commissioner’s final order No.53/CE/2003 dt. 20.6.2003 issued vide C.No. IV (16) C.Levy/RR/96/T/97/2564 dt. 26.6.2003, ACP of the party has been re-determined the same as it was determined earlier. Since, the supplier/manufacturer of the inputs had not discharged full duty liability as determined by the competent authority, they were not authorized to give certificate on the invoices that “goods cleared under Rule 96 ZP” and deemed modvat credit is not admissible on such invoices. Therefore, I observe that the appellants have taken deemed credit of Rs.38153/- without fulfilling the conditions of the Notification No.58/97 ibid read with Rule 57 A (6) ibid.” 9. Aggrieved against the said order of the Commissioner (Appeals), the respondent/assessee filed further appeal before the Customs, Excise & Service Tax Appellate Tribunal, New Delhi. While allowing the appeal of the assessee/respondent, the Tribunal vide its order dated 24.8.2006 found that the Commissioner (Appeals) had rejected the appeal of the assessee on totally different grounds than the one which has been alleged in the show cause notice and therefore, the same is liable to be set aside. Hence this appeal by the Revenue. 10. The crux of the argument raised by the Revenue in the grounds of appeal is that the credit which has been denied to the assessee on the ground that the invoices on which deemed credit has been availed, do not bear the declaration “appropriate duty under Rule 96 ZP/Section 3A has been discharged.” It is his submission that the invoice on which the credit sought to be denied bears only the declaration “goods cleared under Rule 96ZP.” He submits that the provisions of notification 58/97 clearly mention that the credit can be allowed only if there is a declaration to that effect and thus the adjudicating authority passed the order in original dated 29.5.2000 legally and correctly. However, Sanjeev Kaushik, Advocate very fairly conceded that the matter herein is covered against the revenue by a Division Bench judgment of this Court rendered in the case of M/s Vikas Pipes vs. Commissioner of Central Excise, Chandigarh-II, 2003(158) ELT 680 (P&H). He has also brought to the notice of this Court that similar appeal i.e., CEA No.16 of 2007-titled as The Commissioner Central Excise, Jalandhar Versus M/s Kay Kay Industries, Jalandhar decided on 20.4.2007 has also been dismissed relying upon the Division Bench judgment of this Court in Vikas Pipes (supra). Thus there is no substantial question of law as raised by the appellant arises for determination of this Court. 11. Accordingly, the appeal is dismissed. (RAKESH KUMAR GARG) JUDGE January 28,2008 (SATISH KUMAR MITTAL) nk JUDGE