C.C. and C.E., Meerut-II vs Muzaffarnagar Pipe Industries (P) Ltd.

The Facts : M/s. Muzaffarnagar Pipe Industries (P) Ltd., District Muzaffarnagar (the Assessee) manufactures pipe and hollow profiles of Iron & Steel falling under sub-heading No. 7306.90 of the schedule to the Central Excise Tariff Act, 1985 (the Tariff Act).

The Assessee''s product is manufactured from MS steel. He purchases these inputs from different manufacturers and utilizes modvat credit on the basis of the invoice supplied by them in which an endorsement is made that liability of the excise duty has been cleared off by the manufacturer.

A report was received by the Excise department (the Department) that one of the manufacturers namely M/s. Virat Steels (P) Ltd. had not discharged its excise duty. The show cause notices for the period July, 1998 and August, 1999 to December, 1999 were issued to the Assessee.

In the show cause notice in respect of July, 1998, the adjudicating of- ficer disallowed the credit utilised by the Assessee. However, by different order in the show cause notice for the period August, 1999 till December, 1999 the proceedings were dropped.

The Assessee filed an appeal in the proceedings against the order of the Adjudicating Officer in respect of the show cause notice for the period of July, 1998 whereas the Department filed an appeal against the order of the adjudicating officer dropping the proceedings in respect of the assessment period August 1999 to December, 1999.

The Commissioner (Appeals) by separate orders allowed the appeal of the Assessee for the period July, 1998 and dismissed the appeal of the Department in respect of the period August, 1999 to December, 1999.

The Department filed an appeal before the Customs, Excise and Service Tax Appellate Tribunal (the Tribunal). Both the appeals were dismissed by the Tribunal by separate orders. Hence the present two appeals.

The Central Excise Appeal No. 94 of 2005 relates to the period August, 1999 to December, 1999. Whereas the Excise Appeal No. 324 of 2005 relates to the period of July, 1998.

We have heard Sri R.C. Shukla, counsel for the Department and Sri A.P. Mathur, counsel for the assessee.

The Decision

The Assessee had claimed the modvat credit in view of the Notification No. 58/97-C.E. Rules dated 30-8-1997 as amended by Notification No. 2/98-C.E. Rules dated 10-3-1998 (the Notification). Under the Notification, the conditions are as follows:

� The Assessee should have received the inputs directly from its manufacturer; and

� The invoices should have endorsement that the excise duty has been duly paid.

There is no dispute that the inputs were received directly from its manufacturers and the invoices contained necessary endorsement. In view of this, the Tribunal committed no illegality in dismissing the appeals of the Department.

The counsel for the Department brought to our notice the Proviso to sub-rule (6) of Rule 57-A and submits that:

� The Rule envisages the assessees to take all reasonable steps to ensure the appropriate duty on the inputs acquired by him had been paid;

� In the present case, only the invoice containing endorsement was produced;

� This is not a reasonable step to ensure that the duty was paid on the inputs.

The proviso to Rule 57A(6) does not indicate as to what are the reasonable steps. However, it has been indicated in the Notification. It permits availing of the modvat credit after ensuring the following two steps namely:

� Firstly, the Assessee should receive the inputs directly from its manufacturers; and

� Secondly, invoice should contain the necessary endorsement that the excise duty has been paid on the inputs.

This has been done in the case.

There is neither any finding nor any suggestion in the show cause notice that the Assessee was party to the incorrect endorsement. The Assessee cannot be blamed for the same. In any case, the liability, if it was not discharged, was of the manufacturer of the inputs : it cannot be fastened on the Assessee without any reason.

In view of above, the Tribunal rightly dismissed the appeals of the Department. No substantial question has arisen in the appeals. The appeals have no merit.

However, in case, any manufacturer of the inputs has not paid its duty and gave a wrong endorsement in the invoice, then, it is always open to the Department to take appropriate proceedings against the same.

With the aforesaid observations, both the appeals are dismissed.