2015 (11) TMI 1640 - AT - Central Excise

CENVAT credit - a part of the consideration has been remitted to the appellant by the supplier of inputs due to substandard inputs - whether Cenvat credit is required to be reduced on account of certain reimbursement made by the supplier of the inputs being damaged/sub-standard inputs - Held that - there is no evidence on record that inputs, on which credit has been taken, are not used in the manufacture of finished goods except a bald statement existing in the SCN - reliance placed in the case of Creative Polypack Ltd. v. CCE, Kolkata-II 2007 (7) TMI 268 - CESTAT, KOLKATA , where it was held that there was no question of reversing Cenvat Credit on the amounts of Debit Notes - appeal allowed - decided in favor of appellant.

Summary

Issues:
Reduction of Cenvat credit due to reimbursement for substandard inputs.

Analysis:
The appellant appealed against OIA No. 32/HAL/2012, challenging the reduction of Cenvat credit due to reimbursement received from the supplier for substandard inputs. The appellant argued that credit should not be reduced based on any amount remitted by the supplier, citing relevant case laws. The Revenue contended that if the price is reduced, the entire credit on inputs cannot be claimed, especially if the inputs are damaged or substandard. After hearing both parties and examining the case records, the Tribunal considered whether Cenvat credit should be reduced due to reimbursement for damaged/substandard inputs. Referring to previous case law, the Tribunal noted that as long as the duty paid remains unchanged, there is no need to vary the credit, even if the appellant receives reimbursements from suppliers. The Tribunal also observed that there was no concrete evidence to support the Revenue's claim that the damaged/substandard inputs were not used in manufacturing finished goods, apart from a mere assertion in the show cause notice. Consequently, the Tribunal rejected the Revenue's argument and allowed the appeal filed by the appellant.

This judgment clarifies the principles governing the reduction of Cenvat credit in cases where suppliers reimburse amounts for substandard inputs. It emphasizes the importance of maintaining the link between the duty paid and the credit claimed, highlighting that unless the duty originally paid is altered, there is no obligation to adjust the credit. Additionally, the judgment underscores the significance of providing substantial evidence to support claims regarding the usability of damaged or substandard inputs in the manufacturing process. Overall, the decision provides a balanced approach by considering both legal precedents and factual evidence to arrive at a fair and reasoned conclusion in favor of the appellant.