2010 (8) TMI 894 - AT - Central Excise

Issues:
1. Availment of Modvat Credit on raw materials.
2. Reduction in price of raw material leading to extra credit availed.
3. Denial of Cenvat Credit and confirmation of interest.
4. Appeal against the order confirming debit entry and interest.
5. Examination of eligibility for reversal of Cenvat Credit.
6. Contesting reversal of Modvat Credit based on input supplier's actions.
7. Disputed facts regarding the availability of credit based on input supplier's invoices.
8. Decision on denial of credit and confirmation of interest.

Analysis:
1. The appellants, engaged in manufacturing Polyester Texturised Yarn (PTY), availed Modvat Credit on duty paid for raw material Polyester Oriented Yarn (POY) received from an input supplier. The input supplier reduced the price of POY, leading to the appellant availing extra credit of &8377; 8,29,287 during 2004 to January 2007.

2. The Revenue contended that the appellant had availed extra credit due to the price difference in POY. The authorities initiated proceedings for confirmation of interest. The appellant argued that the credit availed was based on duty-paying invoices from the input supplier, who did not claim a refund despite the price reduction. The original authority confirmed the debit entry and interest.

3. On appeal, the appellate authority noted that the appellant challenged the interest element only, without contesting the reversal of Cenvat Credit. However, the Commissioner (Appeals) incorrectly stated that the appellant did not contest the reversal, which was factually incorrect.

4. The appellate tribunal found that the credit availed by the appellant was based on duty paid by the input supplier, who did not seek a refund. The reduction in input price did not affect the duty paid by the supplier, so denying credit to the appellant was unwarranted. The tribunal set aside the impugned order and allowed the appeal, concluding that the credit should not be denied, and interest confirmation was not justified.

5. The judgment highlighted the importance of the duty paid by the input supplier as the basis for availing credit, emphasizing that the subsequent reduction in input value should not impact the credit availed by the appellant. The decision focused on the legal provisions governing the availment of credit based on duty-paying documents issued by the input supplier.

6. The tribunal's analysis centered on the factual aspects of the case, emphasizing that the appellant's credit availed was legitimate as it was based on invoices from the input supplier who did not seek a refund despite the price reduction. The judgment underscored the need to align credit availment with the actual duty paid by the supplier, ensuring compliance with the law.

7. Ultimately, the tribunal's decision to set aside the order and allow the appeal provided consequential relief to the appellant, emphasizing the adherence to legal provisions governing the availment of credit based on duty-paying documents and the non-impact of price reductions on the legitimacy of credit availed by the appellant.

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