2009 (5) TMI 743 - AT - Central Excise

Cenvat/Modvat - duty paying documents - eligible Documents for taking credit - Rule 7(1) of the Cenvat Credit Rules, 2002 -

Summary

Issues:
1. Cenvat credit eligibility when goods are acquired through a third party.
2. Interpretation of Rule 7(1) of the Cenvat Credit Rules, 2002 regarding valid documents for Cenvat credit.
3. Application of precedent cases in determining Cenvat credit eligibility.

Analysis:

1. Cenvat Credit Eligibility Through Third Party Acquisition:
The case involved an appeal against the confirmation of Cenvat credit demand and penalty imposed on the appellant for acquiring goods through a third party. The Deputy Commissioner upheld the demand, stating that since the appellant purchased goods from a third party and not directly from a second stage dealer, they were ineligible for Cenvat credit. The Commissioner (Appeals) also affirmed this decision. The appellant argued that as per Rule 7(1) of the Cenvat Credit Rules, invoices from second stage dealers are valid for Cenvat credit. The Tribunal examined the facts and established that although the goods were acquired through a third party, the second stage dealer directly supplied the goods to the appellant, making the Cenvat credit claim valid.

2. Interpretation of Rule 7(1) of Cenvat Credit Rules:
Rule 7(1) of the Cenvat Credit Rules, 2002 specifies that invoices from first or second stage dealers are acceptable for Cenvat credit. The Tribunal referenced previous cases to support its interpretation that the mere mention of a third party on the invoice does not invalidate the credit claim if the goods were received directly by the user. Relying on the Board Circular No. 96/7/95-CX, the Tribunal emphasized that the crucial factor is the direct receipt of goods by the user, not the intermediary mentioned on the invoice. The Tribunal also cited precedents like Prakash Cotton Mills Ltd. v. CCE, Bombay, Beepee Coatings Ltd. v. CCE, Vadodara, and Ashok Leyland Ltd. v. CCE, Chennai to reinforce the principle that Cenvat credit cannot be denied based solely on the mention of a third party on the invoice.

3. Application of Precedent Cases in Cenvat Credit Eligibility:
The Tribunal extensively discussed how previous judgments, such as Malwa Cotton Spg. Mills Ltd. v. CCE, Chandigarh and Prakash Cotton Mills Ltd. v. CCE, Bombay, supported the appellant's claim for Cenvat credit. These cases highlighted that as long as the goods were received directly by the user from a second stage dealer, the credit claim remains valid. By analyzing these precedents and the specific circumstances of the case, the Tribunal concluded that the impugned order denying Cenvat credit was unsustainable. Consequently, the Tribunal set aside the order and allowed the appeal in favor of the appellant.

In conclusion, the Tribunal's detailed analysis and application of legal provisions and precedent cases resulted in the appellant successfully challenging the denial of Cenvat credit based on acquiring goods through a third party. The judgment clarified the importance of direct receipt of goods by the user for Cenvat credit eligibility, irrespective of the intermediary mentioned on the invoice.