2015 (7) TMI 1143 - AT - Central Excise

Denial of CENVAT credit - manufacture of sheet metal parts falling under Chapter 72, 76 and 82 of the Central Excise Tariff Act, 1985 - exemption claimed from payment of excise duty - whether the denial of CENVAT credit justified on the ground that the supplier was not liable to pay the Central Excise duty and has paid the same, the recipient of the goods i.e. the appellant is not eligible for CENVAT benefit? - Held that - Taking of CENVAT credit of Central Excise duty and service tax paid by the supplier, is in conformity with Rule 3(1) of the CENVAT Credit Rules, 2004. The fact is not under dispute that the goods covered under the disputed invoices have not been received by the appellant for use in the intended purpose. Further, it has also not been alleged by the authorities below that the Central Excise duty/ service tax liability has not been discharged by the suppliers of disputed goods/ services. Thus, in absence of any specific prohibition in the CENVAT Statute, restricting availment of CENVAT credit, in the eventuality, of any dispute between Central Excise Department and the supplier, the recipient of the goods, cannot be held liable for reversal of CENVAT credit. The decision in the case of CCE & CC vs MDS Switchgear Ltd. 2008 (8) TMI 37 - SUPREME COURT relied upon where it was held that quantum of duty already determined by the jurisdictional officers of the supplier unit cannot be contested or challenged by the officers incharge of recipient unit. Denial of CENVAT credit not justified - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Denial of cenvat credit based on invoices issued by supplier
- Responsibility of excisable goods classification
- Dispute over duty/tax payment at supplier's end
- Applicability of Cenvat Credit Rules, 2004
- Interpretation of Rule 3(1) of Cenvat Credit Rules, 2004

Analysis:
The case involved the denial of cenvat credit to the appellant for Central Excise duty and service tax paid on capital goods and input services based on invoices issued by the supplier, M/s SKM Steels Ltd., Indore. The Department contended that since the supplier was not liable to pay the duty due to an exemption claimed, the appellant was ineligible for the credit. The appellant argued that the responsibility of classifying excisable goods lies with the Jurisdictional Central Excise Authorities at the supplier's end. The appellant's advocate cited the Cenvat Credit Rules, 2004, emphasizing that if duty/tax payment liability at the supplier's end is not disputed, the credit cannot be denied.

The advocate relied on a judgment of the Hon'ble Supreme Court in the case of CCE & CC vs MDS Switchgear Ltd., asserting that if the disputed goods were received and utilized by the appellant, the credit should be available. The Department, represented by the Ld. DR, reiterated the findings of the impugned order. After hearing both sides, the Member (Judicial) analyzed Rule 3(1) of the Cenvat Credit Rules, 2004. It was noted that the disputed goods covered under the invoices were not received by the appellant for the intended purpose, and there was no allegation of non-payment of duty/tax by the suppliers.

The Member (Judicial) found that in the absence of a specific prohibition in the Cenvat Statute, the recipient of the goods should not be held liable for credit reversal in case of a dispute between the Central Excise Department and the supplier. Referring to the judgment in the case of MDS Switchgear, it was held that the duty determined by the supplier's jurisdictional officers cannot be challenged by the recipient unit's officers. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant.