2014 (4) TMI 1168 - AT - Service Tax

CENVAT credit - duty paying documents - denial on the ground that the appellant wrongly availed credit on the basis of invoices furnished by a third stage dealer, contrary to the provisions of Rule 7 of the CCR, 2002 - Held that - In terms of Rule 7 of the 2002 rules, invoices on the basis of which cenvat credit can be availed should be furnished either by a first stage or a second stage dealer - Since M/s. Shanti Lal & Brothers is established to be a third stage dealer the appellant is seen to have availed cenvat credit on the basis of invoices which are not valid and authorised by the relevant rules - credit not allowed - appeal dismissed - decided against appellant.

Summary

Issues: Disallowance of cenvat credit, recovery under Section 11A, interest under Section 11AB, penalties under Section 11AC, imposition of penalties under Rule 13 of Cenvat Credit Rules, 2002, validity of invoices from third stage dealer for availing cenvat credit, interpretation of Rule 7 of Cenvat Credit Rules, 2002, sustainability of concurrent orders, entitlement to cenvat credit based on invoices.

The judgment pertains to an adjudication order disallowing cenvat credit of a specific amount, directing its recovery under Section 11A of the Central Excise Act, 1944, confirming the levy and recovery of interest under Section 11AB, and imposing penalties under Section 11AC. Additionally, a penalty under Rule 13 of the Cenvat Credit Rules was confirmed for one party while declining imposition of penalties on other individuals associated with the appellant. The proceedings were initiated based on the premise that the appellant wrongly availed credit on the basis of invoices from a third stage dealer, which was contrary to the provisions of Rule 7 of the Cenvat Credit Rules, 2002. The rule allowed cenvat credit only on invoices issued by first or second stage dealers, not third stage dealers. The primary authority confirmed the demand of duty, interest, and penalties, including on the third stage dealer involved in the transaction.

The appellant's appeal was rejected by the Commissioner, Central Excise (Appeals), who upheld the disallowance of cenvat credit and associated penalties. The appellant argued that an invoice indicated the third stage dealer was either a first or second stage dealer, leading them to believe they were entitled to avail cenvat credit under Rule 7 of the Cenvat Credit Rules, 2002. However, upon review of the material on record, it was established that the third stage dealer indeed purchased the goods from a second stage dealer, making them ineligible for cenvat credit as per Rule 7. Consequently, the appellate tribunal found no error in the impugned order and dismissed the appeal, deeming it without merit.

In conclusion, the judgment upholds the disallowance of cenvat credit, recovery under relevant sections of the Central Excise Act, imposition of penalties under the Cenvat Credit Rules, interpretation of Rule 7 regarding valid invoices for cenvat credit availing, and the sustainability of the concurrent orders passed by the authorities below. The appellant's argument based on the invoice indicating the third stage dealer as a first or second stage dealer was deemed insufficient to justify the erroneous availing of cenvat credit, leading to the dismissal of the appeal.