By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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Whether the CENVAT Credit on inputs can be denied to the receiver of input on the grounds that supplier of raw materials did not deposit duty to the Government? Held, No.
Facts:
The assessee claimed the MODVAT credit in respect of the inputs supplied to the assessee on the strength of invoices issued to it. The full amount of invoices was paid by the appellant to the supplier. The inputs supplied were excisable items was also not in dispute. The MODVAT credit was denied only on the ground that the supplier did not actually deposit the excise duty payable on the said inputs supplied to the assessee. The Revenue relying upon Rule 57G contended that, unless the duty was paid on inputs, no MODVAT credit can be availed by the assessee. Reliance was also placed on the decision in the case of IDL Chemicals Ltd. vs. CCE 1996 (88) ELT 710 (Tri – Cal.).
Held:
The Hon’ble High Court held that, once a buyer of inputs receives invoices 17 of excisable items, unless factually established to the contrary, the buyer is entitled to assume that the excise duty has been/ will be paid by the supplier on the excisable inputs. It would be most unreasonable and unrealistic to expect the buyer of such inputs to go and verify the accounts of the supplier or to find out from the department of Central Excise whether duty has actually been paid on the inputs by the supplier. No business can be carried out like this and the law does not expect the impossible. The High Court overruled the decision in the case of IDL Chemicals relied upon by the Revenue holding it as incorrect.
