2008 (9) TMI 744 - AT - Central Excise

Cenvat/Modvat - Inputs - Document for availing credit - Board s Circular No. 766/82/2003-CX., dated 15-12-2003 - Held that - when the transactions of the user of the inputs were genuine and the bonafide nature of the same is not disputed, action should not be taken to recover Cenvat credit availed by such manufacturers on the ground that the supplier of the inputs had failed to discharge its monthly duty liability - credit allowed - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Disallowance of credit to the respondent due to the supplier's default in duty payment.
2. Requirement of taking reasonable steps to ensure duty paid inputs for availing input credit.
3. Interpretation of relevant case law and circulars supporting the decision of lower authorities.

Issue 1:
The appeal involved the disallowance of credit amounting to Rs. 8,59,095/- taken by the respondent due to the supplier's failure to pay duty for the related month. The lower authorities had dropped the proposal to demand the credit from the respondent, citing the Circular No. 766/82/2003-CX issued by the Board. The original authority deemed the respondent a bona fide buyer of the inputs and thus exempt from reversing or recovering the Cenvat credit availed in such cases. The impugned order upheld this decision, relying on the same grounds and the mentioned Circular.

Issue 2:
The second issue revolved around the requirement under Rule 7(2) of Cenvat Credit Rules, 2002 for the respondent to ensure they received only duty paid inputs to avail input credit. The revenue contended that the respondent had not taken reasonable steps to fulfill this requirement. It was highlighted that the department could not recover the duty short paid by the supplier-manufacturer, who had become a sick unit. Consequently, the Government did not receive the due duty on the inputs and final products of the respondent as they had availed credit for unpaid duty.

Issue 3:
Regarding the interpretation of relevant case law and circulars, the ld. Counsel relied on a decision of the Tribunal and the Board's Circular No. 766/82/2003-CX to support the lower authorities' decision. The Tribunal's decision in a similar case emphasized that if there was no dispute regarding the receipt of inputs with duty payment particulars, the credit of such duty could not be denied. The presiding judge, after considering the case law and Circular, dismissed the appeal filed by the revenue, as there was no reason to interfere with the impugned order.

In conclusion, the judgment upheld the lower authorities' decision to not disallow the credit to the respondent based on the supplier's duty payment default, citing relevant Circular and case law. It also emphasized the importance of ensuring duty paid inputs for availing credit and highlighted the consequences of failing to do so. The decision was supported by legal precedents and official Circulars, leading to the dismissal of the revenue's appeal.