2016 (5) TMI 1324 - AT - Central Excise

CENVAT credit - duty paying documents - the invoices were not in the name of the appellants nor were they endorsed in their favor - Rule 7(1)(e)(b) of the CCR, 2002 - Held that - The original documents cannot be endorsed to more than one person, however, endorsement by a separate letter can be done to any number of people. It is not understood as to why the appellant had not got the said documents endorsed by the supplier on the body of the documents. The same cannot be considered as a mere procedural formality. Since there is an easy and specific provision in the rule, not following the same, leads to suspicion of evasion. I find no logical reason for appellants to not have followed such an easy procedure prescribed in Rule 7 and getting endorsement on the body of the invoice - benefit not to be extended to appellant - appeal dismissed - decided against appellant.

Issues:
Availment of credit on invoices not in the name of the appellants, interpretation of Rule 7(1)(e)(b) of Cenvat Credit Rules, 2002, requirement of endorsement for availing credit, procedural compliance for credit availment, denial of credit due to lack of proper endorsement.

Analysis:

1. Availment of credit on invoices not in the name of the appellants:
The appellants, M/s. Jalan Dyeing & Bleaching Mills, had availed credit on invoices not issued in their name. The invoices were in the name of other entities, namely M/s. Chirag Fabrics Pvt. Ltd. and M/s. Prakash Cotton Mills Pvt. Ltd. The appellants were not the consignees, and the invoices were not endorsed in their favor. The issue was whether credit could be taken on such invoices without contravening the Cenvat Credit Rules, 2002.

2. Interpretation of Rule 7(1)(e)(b) of Cenvat Credit Rules, 2002:
The appellants argued that Rule 7(1)(e)(b) permitted them to avail credit on the strength of the invoices in question. This rule allows credit on documents issued to persons involved in the purchase and sale of specific goods, provided the documents are endorsed in full for the entire consignment covered. The appellants contended that the invoices were endorsed by the entities in whose name they were issued, albeit through a separate letter and not on the body of the invoices.

3. Requirement of endorsement for availing credit:
The CESTAT Mumbai examined the provisions of Rule 7(1)(e)(b) and emphasized the necessity of endorsement for availing credit. The rule mandates that documents must be endorsed in favor of the manufacturer to claim credit. In this case, the endorsement was not on the documents but through a separate letter. The tribunal highlighted that the prescribed procedure was in place to prevent evasion, and not following it raised suspicions.

4. Procedural compliance for credit availment:
The tribunal noted that the appellants did not adhere to the procedural requirement of getting endorsements on the body of the invoices, as specified in Rule 7. The failure to follow this simple procedure, despite a clear provision in the rule, led to the denial of credit. The tribunal emphasized that the endorsement process was not a mere formality but a crucial step for availing credit legitimately.

5. Denial of credit due to lack of proper endorsement:
Ultimately, the tribunal dismissed the appeal, ruling that the benefit of credit could not be extended to the appellants due to the lack of proper endorsement on the invoices. Additionally, the tribunal found discrepancies in the details on the invoices, including different addresses and lack of proper endorsement, casting doubt on whether the goods were actually received by the appellants. The failure to comply with the endorsement requirement and procedural norms led to the denial of the credit benefit.

In conclusion, the judgment by the CESTAT Mumbai in this case underscores the importance of strict compliance with procedural requirements, such as proper endorsement on invoices, for availing credit under the Cenvat Credit Rules, 2002. Failure to adhere to these requirements can result in the denial of credit benefits, as observed in this particular dispute.

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