2011 (7) TMI 468 - AT - Central Excise

Demand - M/s. Amul Industries Ltd. had cleared the inputs on payment of duty - There is no dispute about the same - No fault can be found at the respondent s end to avail credit of duty admittedly paid by M/s. Amul Industries Ltd - If there is any dispute as regards M/s. Amul Industries Ltd. being a manufacturer or not, the said dispute is of legal nature and in any case is being contested by M/s. Amul Industries Ltd. - A person availing credit of duty paid by the raw material supplier is not expected to examine the legal dispute as regards supplier being a manufacturer or not - Decided against the revenue.

Summary

Issues:
- Dispute regarding availing cenvat credit based on inputs from a supplier facing legal issues.
- Interpretation of Rule 7 of Cenvat Credit Rules.
- Validity of availing cenvat credit when duty is paid by the supplier.

Analysis:

1. Dispute regarding availing cenvat credit based on inputs from a supplier facing legal issues:
The case involved a respondent who availed cenvat credit of duty paid on inputs from a supplier, M/s. Amul Industries Ltd., who faced a dispute regarding their status as a manufacturer. The Commissioner (Appeals) had set aside the demand against the respondent, noting that M/s. Amul Industries Ltd. had paid the duty properly, and there was no dispute about it. The Tribunal observed that the respondent could not be denied cenvat credit based on the legal issues faced by the supplier.

2. Interpretation of Rule 7 of Cenvat Credit Rules:
The Revenue contended that Rule 7 of the Cenvat Credit Rules required the assessee to take precautions before availing cenvat credit and that the respondent had not provided evidence to prove the validity of the documents for availing credit. However, the Tribunal found no merit in this argument as M/s. Amul Industries Ltd. had indeed paid the duty on the inputs, and there was no dispute about it. The Tribunal held that Rule 7 was not applicable in this case since the duty had been paid by the supplier.

3. Validity of availing cenvat credit when duty is paid by the supplier:
The Tribunal emphasized that the respondent had done nothing wrong in availing the cenvat credit based on duty paid by M/s. Amul Industries Ltd. The Tribunal highlighted that it was not the responsibility of the respondent to verify the legal status of the supplier as a manufacturer. As the duty payment by the supplier was confirmed, the Tribunal concluded that denying the credit to the respondent would result in double jeopardy. Therefore, the impugned order passed by the Commissioner (Appeals) was upheld, and the Revenue's appeal was rejected.

In conclusion, the Tribunal's judgment focused on upholding the right of the respondent to avail cenvat credit based on duty paid by the supplier, even if the supplier was facing legal disputes. The Tribunal clarified that Rule 7 did not apply in this scenario and emphasized that the respondent acted appropriately in availing the credit.