ORDER
P.G. Chacko, Member (J)
1. These appeals are against a common order passed by the Commissioner (Appeals) allowing five appeals of the department. The appellants are engaged in the manufacture of “woven coated fabrics” (Heading 59.03) and “non-woven coated fabrics” (Heading 56.03) and are availing the facility of Cenvat credit on inputs. Their manufacturing activity is coating of Poly Vinyl Chloride (PVC) on processed fabrics (input). During the periods of dispute (between August 1997 and February 2000), the appellants had received processed cotton fabrics (Heading 52.07) for manufacture of coated fabrics and had taken Modvat credit on the input (processed fabric). The credit so taken was of the duty shown in the relevant invoices issued by the input supplier. But only 50% of this duty had been paid from PLA by the input supplier, the remaining 50% having been paid by them by availing deemed credit under Notification No. 29/96- CE. (N.T.) dated 3-9-1996. Insofar as this 50% of duty on input paid by its manufacturer through deemed credit is concerned, the burden of duty was not passed on to the appellants inasmuch as this duty element was deducted from the total value of the goods for the purpose of payment by the appellants. The invoice covering the sale of input to the appellants, however, showed the entire amount of duty (50% paid from PLA + 50% paid through deemed credit) as having been paid on the input. The appellants took credit of this amount, which was objected to by the department, which took the view that credit could have been taken only of that part of the duty on input, the burden of which was borne by the appellants. In respect of the duty paid on input by its supplier by availing deemed credit under Notification No. 29/96-C.E. (N.T.), the burden of which was not passed on to the appellants, the department took the view that Modvat credit was not available to the appellants. Such credits taken by the appellants during the periods of dispute were sought to be disallowed in show cause notices issued from time to time. These SCNs came to be adjudicated upon in separate orders of the original authority. That authority upheld the assessee’s stand and dropped proceedings. The jurisdictional Commissioner of Central Excise reviewed the orders of the Dy. Commissioner (original authority) under Sub-section (2) of Section 35E of the Central Excise Act and, accordingly, five applications were filed with the Commissioner (Appeals) by the Asst. Commissioner, which were treated under Section 35E(4) as appeals of the Revenue, which were allowed by ld. Commissioner (Appeals) as already indicated.
2. Heard both sides. Ld. counsel for the appellants raised a preliminary objection. He submitted that the only remedy available to the department against the orders passed by the Dy. Commissioner was to file appeals with the Commissioner (Appeals) under Section 35 of the Central Excise Act. According to him, the impugned order passed by the Commissioner (Appeals) under Subsection (4) of Section 35E of the Act is without jurisdiction. This argument was vehemently contested by ld. DR, who submitted that the appropriate remedy for the department against the orders of the original authority was under Section 35E(2) only and recourse was duly taken to this remedy. I find that ld. Counsel has not questioned the action taken by the jurisdictional Commissioner under Section 35E(2). His grievance is only with regard to the procedure adopted under Section 35E(4) by the Commissioner (Appeals). According to counsel, what Section 35E(4) permitted the Commissioner (Appeals) to do was only to hear and not to pass any order. This argument is difficult to comprehend. There is also nothing on record to indicate that the assessee raised any jurisdictional issue or procedural objection before the Commissioner (Appeals) at any point of time during the first appellate stage. I do not find any reason to consider the impugned order as having been passed without jurisdiction. The counsel’s objection is overruled.
3. On the merits of the case, ld. counsel submitted that the appellant was entitled to take Modvat credit of the duty paid (in whatever manner) on the input by the input-supplier. Whether any part of that duty was paid through availment of deemed credit was immaterial, according to ld. counsel. On the other hand, ld. DR argued that the appellants were entitled to take Modvat credit of only that duty on input, which was paid by its supplier and passed on to the appellants. After considering the submissions, I find that the input-supplier had paid part of the duty on input by availing deemed credit facility under Notification No. 29/96-C.E. (N.T.) and this duty burden was not passed on to the appellants. Admittedly, the appellants were not entitled, directly or indirectly, to the benefit of the said Notification. If they are allowed to avail credit of that duty on input which was paid by its supplier by availing the benefit of deemed credit, the appellants would be virtually availing the benefit of the Notification. Moreover, the very purpose of Modvat scheme (avoidance of cascading effect) would be defeated. The Notification did not contemplate any direct or indirect benefit of deemed credit to the appellants, nor did the Modvat scheme permit the appellant to avail that benefit contrary to the very purpose of the scheme. Hence I am of the considered view that the appellants were not entitled to avail the credit in question.
4. The impugned order is upheld and these appeals are dismissed. (Objective part of the order was pronounced in open Court in 21-4-2005)