2011 (7) TMI 356 - AT - Central Excise

Cenvat credit - Disallow credit availed by the assessees who are the recipients of the inputs because the input supplier had not discharged the duty liability under Section 3A - Held that - issue stands settled against the Revenue by the decision of the Hon ble Allahabad high Court in the case of CC&CE, Meerut Vs. Muzaffarnagar Pipe Industries Pvt. Ltd. (2011 -TMI - 202592 - ALLAHABAD HIGH COURT), holding that credit was rightly availed on the strength of invoices containing endorsement that the duty liability under Section 3A of the Act had been discharged by the manufacturer/supplier. The Court has held if the duty liability was not discharged, the manufacturer was responsible and the liability cannot be fastened on the assessees unless it was found that assessee was a party to incorrect endorsement on the invoices.

Summary

Issues: Disallowance of credit availed on inputs due to non-discharge of duty liability by the supplier; Imposition of penalty on the assessees; Applicability of the decision of the Hon'ble Allahabad High Court in a similar case.

In this case, the main issue revolved around the disallowance of credit availed by the assessees on inputs, specifically MS bars, as the input supplier had not discharged the duty liability under Section 3A of the Central Excise Act, 1944. The Assistant Commissioner disallowed the credit and imposed a penalty of Rs. 500 on the assessees. However, the lower appellate authority set aside the disallowance and the penalty, leading to an appeal by the Revenue.

Upon thorough consideration, the Appellate Tribunal found that the issue had already been settled against the Revenue by the decision of the Hon'ble Allahabad High Court in a similar case. The Tribunal cited the case of CC&CE, Meerut Vs. Muzaffarnagar Pipe Industries Pvt. Ltd., where it was held that credit could be rightfully availed based on invoices indicating that the duty liability under Section 3A had been discharged by the manufacturer/supplier. The Court emphasized that unless the assessee was a party to incorrect endorsements on the invoices, the liability could not be imposed on them. In the present case, the documents supporting the credit availed by the assessees contained a declaration of duty liability discharge, and the Revenue did not establish that the assessees were involved in any incorrect endorsements. Therefore, following the precedent set by the Hon'ble Allahabad High Court and the Hon'ble P&H High Court, the Tribunal upheld the lower appellate authority's decision, rejecting the Revenue's appeal. The cross objection was disposed of as a response to the Revenue's appeal.

The judgment highlights the importance of proper documentation and endorsement on invoices to establish the rightful availing of credit by assessees. It also underscores the principle that unless the assessees are directly involved in any fraudulent activities related to duty liability, they cannot be held accountable for the supplier's non-compliance. The decision serves as a precedent for similar cases, providing clarity on the responsibilities of assessees in credit availment scenarios.