2011 (8) TMI 531 - AT - Central Excise

Cenvat credit - whether proportionate credit should be reversed in cases where a manufacturer avails credit of the amount of duty paid by supplier as reflected in the excise invoice but subsequently the supplier allows some trade discount or reduces the price without reducing the duty paid by him - Appellants submitted that Circular No.877/15/2008 dated 17.11.2008 issued by the Board and the decision of the Tribunal in the matter of ECE Industries Limited vs. C.C.E. Rohtak (2011 -TMI - 206003 - CESTAT NEW DELHI)submitted that mere reduction in the price cannot affect the right of the purchaser to avail credit equivalent to the duty paid on the goods in terms of the original price - Therefore allow the appeals and set aside the impugned orders and remand the matters to the adjudicating authority to decide the issue afresh in accordance with the provisions of law.

Summary

Issues:
- Whether the reduction in prices affects the credit available to the purchaser in relation to the duty paid on the original price.
- Whether a manufacturer is entitled to a refund of duty amount equivalent to the difference in duty payable on the amount in the invoice and the amount actually received.

Analysis:
- The first issue revolves around the interpretation of Rule 3 of the Cenvat Credit Rules, 2004, concerning the availability of credit restricted to the duty leviable on goods. The Circular dated 17.11.2008 clarifies that the duty paid by the manufacturer, as shown in the invoice, would be available as credit regardless of subsequent price reductions, unless the duty paid is also reduced along with the price. The Tribunal's decision in ECE Industries Ltd. case supports this view, emphasizing that the credit is based on duty paid by the inputs manufacturer, not duty payable. On the contrary, the decision in C.C.E., Shillong vs. Guwahati Carbon Ltd. highlights the impact of price alterations on the purchaser's credit availability, citing Rule 3 of the Cenvat Credit Rules, 2004.

- The second issue involves a manufacturer's claim for a refund based on the difference between duty paid on the invoiced amount and the actual received price. Section 11B of the Act outlines the procedure for claiming a refund, specifying a one-year limitation from the relevant date. The Tribunal's analysis emphasizes that Section 11B does not address entitlement to a refund but focuses on the timeline for filing refund claims. The judgment clarifies that the valuation for duty liability is determined at the time of removal of goods, typically when invoices are issued. Any subsequent price variations do not alter the duty liability unless specifically provided for in the statute. The Tribunal's decision highlights the absence of statutory provisions allowing refunds based on post-clearance price modifications, emphasizing the manufacturer's obligation to pay duty based on the value at the time of removal.

- Considering the Circular's guidance and recent Tribunal decisions, the judgment concludes that the lower authorities did not have the advantage of this information. Thus, the matter is remanded to the adjudicating authority for a fresh review, taking into account the clarified provisions of Rule 3 of Cenvat Credit Rules, 2004, and statutory duty levies. The decision also distinguishes the Guwahati Carbon Ltd. case, stating it pertains to freight and insurance charges, not the issue at hand. The appeals are allowed, and the impugned orders are set aside for reevaluation in line with legal provisions and the observations provided.