2006 (7) TMI 492 - AT - Central Excise

Summary

Issues:
1. Availment of Cenvat Credit on duty paid by supplier.
2. Applicability of reversing credit on receipt of cash discount.
3. Jurisdiction of Central Excise authorities in re-assessing duty on inputs.
4. Evidence of supplier claiming refund due to price reduction.
5. Department's authority to compel reversal of credit.

Analysis:

1. The appeal challenged the Order-in-Appeal passed by the Commissioner of Customs & Central Excise, Hyderabad, regarding the appellants' availing of Cenvat Credit on duty paid by the supplier, M/s. Sterlite Industries (I) Ltd. The Assistant Commissioner confirmed the demand against the appellants, including interest and penalty under Section 11AC of the Central Excise Act, 1944. The appellants contended that they had taken credit based on the duty indicated in the invoices and were not required to reverse the credit upon receiving cash discounts.

2. The appellants received cash discounts from the supplier after availing Cenvat Credit, effectively reducing the invoice price. The issue arose whether the appellants were obligated to reverse the proportionate Cenvat credit upon receiving discounts. The Commissioner (Appeals) remanded the case, acknowledging that confirming the demand without verifying all facts was unjustifiable. The appellants contested this decision, arguing that they were entitled to the credit based on the duty paid, regardless of subsequent discounts.

3. The appellants' representative cited precedents to support their case, including the decision of the CESTAT in previous cases where it was held that Central Excise authorities did not have jurisdiction to re-assess duty on inputs received by factories. This legal argument aimed to establish that the authorities could not compel the reversal of credit solely based on discounts received by the appellants.

4. The Joint CDR representing the Revenue admitted the lack of evidence showing that the supplier claimed a refund of excess duty due to price reductions granted to the appellants. This acknowledgment highlighted the absence of proof supporting the Revenue's claim for the reversal of credit based on discounts received by the appellants.

5. Upon careful review of the case records, the Judge concluded that the appellants availed Cenvat credit based on the actual duty paid by the suppliers, as indicated in the invoices. The Judge emphasized that the Department could only take action against the appellants for credit reversal if investigations revealed that the supplier had obtained a refund. As no such investigation had been conducted, the Judge allowed the appeal, providing consequential relief to the appellants. However, the Department retained the authority to initiate actions against the appellants based on investigations conducted at the supplier's end, in compliance with the law.