IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. CEA No.102 of 2007(O&M) Date of decision: 26.8.2011 Commissioner of Central Excise, Jalandhar -----Appellant Vs. M/s Royal Enterprises Aujla Road, Kapurthala -----Respondents CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL ACTING CHIEF JUSTICE HON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. Sukhdev Sharma, Standing Counsel for the appellant. --- ADARSH KUMAR GOEL, ACJ 1. This appeal has been preferred by the revenue under Section 35-G of the Central Excise Act, 1944 (for short, “the Act”) against order dated 5.1.2007 passed by the Custom, Excise and Service Tax Appellate Tribunal, New Delhi, claiming following substantial question of law:- “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/no certificate on the body of invoices about dischargement under Rule 96ZP of the erstwhile Central Excise Rules, 1944.” CEA No.102 of 2007 2. The assessee availed deemed Modvat Credit on the strength of invoices issued by the manufacturer which was covered by Compounded Levy Scheme under Section 3A of the Act. The revenue sought to deny the Modvat Credit to the assessee on the ground that the manufacturer of inputs M/s Devta Steel Rolling Mills, Mandi Gobindgarh failed to discharge its duty liability. Accordingly, after issuing Show Cause Notice, the adjudicating authority passed order in original dated 13.9.2004 disallowing the Modvat Credit of `27,078/- and also created demand of interest and penalty. On appeal, the appellate authority held that deemed Modvat Credit could not be denied on the ground that the manufacturer failed to discharge its duty liability in view of notification No.58/97-CE dated 30.8.1997. The Tribunal dismissed the appeal by the revenue. 3. This appeal was admitted in view of pendency of reference at the instance of the revenue in the case of the manufacturer, involving the question whether a manufacturer covered by compounded levy scheme could seek re- determination of its capacity below the originally assessed capacity in the year of assessment. 4. The reference in the case of the manufacturer has been separately decided but the issue raised therein is not the issue involved in this appeal. The appellate authority in the present case, held that under Rule 57A(6) of the Central Excise Rules, 1944, the manufacturer covered by compuneded levy 2 CEA No.102 of 2007 scheme, is deemed to have discharged its duty liability. It was held:- “The issue involved in this case is denial of deemed modvat credit to the appellants on the ground that the manufacturer of inputs had not discharged the full duty liability. I observe that in terms of provisions of notification no.58/97-CE dated 30.8.97 credit of deemed duty paid by manufacturer under Section 3A of the Central Excise Act, 1944 is available subject to the condition that the input are received directly from the factory of manufacturer under cover of an invoice declaring therein that the appropriate duty of excise has been paid on such inputs under the provisions of Section 3A of Central Excise Act, 1944. There is no dispute about receipt of inputs directly from the factory of manufacturers in this case. I observe that invoices involved in this case i.e. invoice no.2261 dated 31-8-99 and 2969 dated 28-10-99 both issued by M/s Devta Steel Rolling Mills Mandi Gobindgarh bear declaration as “Duty liability to be discharged under Rule 96ZP(3)”. The appellants have pleaded that under the deemed credit concept the duty is deemed to have been paid by the manufacturer and that they have taken deemed credit on the strength of statutory invoices issued by consignor-manufacturer.” xx xx xx xx xx “……… Further, I observe that while dealing with the issue of invoices hearing similarly worded declarations as in above invoices, Hon’ble CEGAT is the case of M/s Kapoor Steel Industries Vs CCE, Chandigarh- 2003(55)RLT 48(CEGAT-Del) has held deemed credit admissible as there is compliance of substantive 3 CEA No.102 of 2007 requirement of the notification no.58/97 dated 30-08- 97. With regard to discharge of duty liability by the manufacturer, it has been contended by the appellants that Hon’ble CEGAT, New Delhi vide Final Order No.A/885-86/2000 NB(DB) dated 09-10-2000 allowed the appeal of the input manufacturer, M/s Devta Steel Rolling Mills, Mandi Gobindgarh with regard to charging duty as per rule 3(3) of Hot Re- Rolling Mills, Annual Capacity Determination Rule, 1997. I observe that in case the annual capacity of production of input manufacturer because of dispute cannot be determined at the time of issue of invoice, the scheme of conveyance of deemed credit cannot be put on hold and the substantive benefit of deemed credit cannot be denied to the input purchaser.” Identical view has been taken in judgment of this Court in Vikas Pipe v. CCE, Chandigarh-II [2003] 158 ELT 680 (P&H), as mentioned in the order of the appellate authority. Thus, the question of law raised is covered against the revenue. 5. There is no merit in this appeal. Dismissed. (ADARSH KUMAR GOEL) ACTING CHIEF JUSTICE August 26, 2011 ( AJAY KUMAR MITTAL ) ashwani JUDGE 4