2008 (11) TMI 523 - AT - Central Excise

Summary

Issues:
1. Waiver of pre-deposit and stay of recovery of demand of irregular CENVAT credit availed.
2. Interpretation of Rule 9(b) of the CENVAT Credit Rules, 2004.
3. Applicability of prohibition on availing credit on supplementary invoices in cases of stock transfer.
4. Comparison of Rule 7(1)(b) of CCR, 2002 with Rule 9(b) of CCR, 2004.

Analysis:

Issue 1 - Waiver of pre-deposit and stay of recovery of demand:
The case involved an appeal seeking waiver of pre-deposit and stay of recovery of a demand of irregular CENVAT credit availed by the appellant, along with a penalty imposed. The appellant's argument was that the duty paid by one unit for inputs transferred to another unit within the same entity should be available as credit to the receiving unit. The Tribunal found that the prohibition under Rule 9(b) of CCR, 2004 did not apply in cases of stock transfer between sister units of the same entity, making the demand for credit, interest, and penalty unsustainable. Consequently, the Tribunal ordered waiver of pre-deposit and stay of recovery of dues until the final disposal of the appeal.

Issue 2 - Interpretation of Rule 9(b) of the CENVAT Credit Rules, 2004:
Rule 9(b) of the CENVAT Credit Rules, 2004 prohibits a manufacturer from taking credit of additional duty covered by a supplementary invoice if it relates to non-levy or short-levy of duty due to fraud, collusion, or wilful misstatement. In this case, the original authority concluded that the credit involved duty paid on clandestine clearances, leading to irregular availment of CENVAT credit. However, the Tribunal interpreted Rule 9(b) in light of the stock transfer scenario between sister units, where the prohibition did not apply, as established in a previous decision.

Issue 3 - Applicability of prohibition on availing credit on supplementary invoices in cases of stock transfer:
The appellant argued that the prohibition on availing credit on supplementary invoices only applied in cases of sale, not in situations involving stock transfer between sister units. The Tribunal agreed with this interpretation, emphasizing that the prohibition under Rule 9(b) did not extend to transactions like the one in question, where inputs were transferred for further manufacture within the same entity.

Issue 4 - Comparison of Rule 7(1)(b) of CCR, 2002 with Rule 9(b) of CCR, 2004:
The Tribunal compared Rule 7(1)(b) of CCR, 2002 with Rule 9(b) of CCR, 2004, noting that they were similar in nature. The Tribunal's previous decision in Karnataka Soaps & Detergents Ltd. v. CCE established that the prohibition under Rule 7(1)(b) did not apply in cases of stock transfer between sister units. This comparison further supported the Tribunal's decision to waive pre-deposit and stay recovery of the demand in the present case.

In conclusion, the Tribunal ruled in favor of the appellant, granting waiver of pre-deposit and stay of recovery of the demand, emphasizing the unique circumstances of stock transfer between sister units within the same entity and the inapplicability of Rule 9(b) in such scenarios.