2011 (5) TMI 154 - HC - Central Excise

Cenvat Credit Supplementary invoice held that even if the duty has been paid in excess of the amount finally held to be payable, unless the excess duty paid has been refunded, the assessee could claim cenvat credit as the department could not get the duty twice.

Summary

Issues:
- Appeal by revenue under Section 35G of the Central Excise Act, 1944 against order disallowing cenvat credit on the basis of supplementary invoice due to excess duty paid on inputs.
- Whether cenvat credit can be claimed when duty paid is in excess of the amount finally held to be payable.
- Applicability of earlier judgments in similar cases to determine the admissibility of cenvat credit.

Analysis:
1. The appeal was filed by the revenue challenging the disallowance of cenvat credit by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi. The substantial questions of law raised included the entitlement to cenvat credit based on a supplementary invoice when duty payment is not disputed, denial of cenvat credit due to the supplier not being liable to pay duty, denial of cenvat credit when duty was paid by the supplier due to departmental demand, and the alleged perversity of the impugned order.

2. The Tribunal upheld the disallowance of cenvat credit, stating that the manufacturer can only avail Modvat credit to the extent of duty paid on the inputs purchased. If the inputs were not subjected to duty payment, the manufacturer procuring such inputs cannot claim Modvat credit. Even if the supplier paid duty wrongly, it only entitles the supplier to seek a refund, not create a right for the appellant who procured duty-free inputs. The Tribunal found no fault in the impugned order and dismissed the appeal accordingly.

3. The High Court heard arguments from both parties. The appellant's counsel contended that if duty was paid in excess of the amount finally held to be payable, the assessee should be able to claim cenvat credit as the department cannot collect duty twice. The appellant relied on a previous court order and judgments in similar cases to support their plea. The respondent's counsel failed to distinguish the applicability of the judgments cited by the appellant.

4. The High Court ruled in favor of the assessee, stating that if duty was paid in excess and not refunded, the assessee could claim cenvat credit to prevent double collection of duty. Citing previous judgments, the court allowed the appeal, answering the questions raised in favor of the assessee.