2013 (12) TMI 1390 - AT - Central Excise

Wrong credit of duty paid on inputs - Held that - The supplier has wrongly paid the duty - The recipient of any inputs have no control over the supplier regarding whether they should pay the duty under a particular heading or not - The circumstances under which the supplier paid the duty is not forthcoming as no notice has been issued to them. The officers incharge of the manufacturing unit who may receive materials from several units cannot be allowed jurisdiction to determine whether each of the suppliers have rightly paid the excise duty or not - The denial of credit to the recipient of the materials on the ground that the supplier need not have paid the duty has been made without jurisdiction - Decided against Revenue.

Summary

Issues:
Department's appeal against Commissioner (Appeals) order dated 11-2-2009 denying credit of duty paid by supplier of inputs.

Analysis:
The case involves an appeal by the department challenging the order of the Commissioner (Appeals) dated 11-2-2009, concerning the denial of credit of duty paid by the supplier of inputs. The respondent, a manufacturer of goods, had received cut/slit aluminum foils from a supplier. The issue arose when it was alleged that the supplier's activities did not amount to manufacture, leading to irregular credit taken by the respondent. The original authority upheld the demand of Rs. 1,78,221 under Rule 14 of Cenvat Credit Rules, 2004, with interest and penalty. However, the Commissioner (Appeals) set aside this order.

During the appeal, the department reiterated the grounds and sought to overturn the Commissioner (Appeals) order. The main contention was that the credit availed by the respondent should be denied as the supplier had wrongly paid the duty. However, the Tribunal observed that the recipient of inputs cannot control whether the supplier pays duty under a specific heading. It was noted that the circumstances under which the supplier paid duty were unclear, as no notice was issued to them. The Tribunal emphasized that officers at the manufacturing unit cannot determine if each supplier paid excise duty correctly, as it would create chaos. Therefore, denying credit to the recipient based on the supplier's duty payment status was deemed to be without jurisdiction.

Consequently, the Tribunal found no valid reason to interfere with the Commissioner (Appeals) order and rejected the appeal by the department. The judgment highlights the importance of clarity in duty payment responsibilities between suppliers and recipients, emphasizing that the recipient should not be penalized for the supplier's actions without proper jurisdiction and evidence.