2014 (9) TMI 845 - AT - Central Excise

Cenvat credit - denial of credit where benefit of Advance Authorization was not availed - Held that - Appellant had been issued Advance Authorization and since they did not use those Advance Authorization for duty free import of inputs, they got the same invalidated and obtained invalidation letters in favour of certain domestic suppliers for duty free supply of the inputs. However, domestic suppliers instead of supplying the inputs duty free in terms of Notification No. 44/01 - CE (NT) dated 26/06/01 supplied those inputs on payment of duty. The appellant took Cenvat credit of that duty. - as held by the Apex court in the case of CCE & CUS vs. MDS Switchgear Ltd. (2008 (8) TMI 37 - SUPREME COURT), while considering availability of Cenvat credit to a manufacturer in respect of some inputs procured by him from another manufacturer, the quantum of duty already determined by the jurisdictional officers of the supplier unit cannot be contested or challenged by the officials incharge of the recipient unit. In this case, there is no evidence produced that the assessment of duty at the end of the domestic suppliers had been reviewed and the duty paid by them has been refunded to them. When this is so, there is no question of denying the Cenvat credit to the appellant. In view of this, the impugned order is not sustainable. The same is set aside. - Decided in favour of assessee.

Summary

Issues:
Cenvat credit eligibility based on duty payment by domestic suppliers against invalidated Advance Authorization.

Analysis:
The appellant, engaged in manufacturing Poly Propylene Filament Yarn, availed Cenvat credit of Central Excise duty paid on inputs and capital goods as per Cenvat Credit Rules, 2004. They obtained Advance Authorization for direct import but got it invalidated for domestic procurement of duty-free inputs. However, the domestic suppliers supplied inputs by paying duty instead of duty-free supply as required. The Department contended that since duty was paid by suppliers against invalidated Authorization, it cannot be treated as Central Excise duty for Cenvat credit eligibility. The Commissioner confirmed a Cenvat credit demand against the appellant, imposing a penalty. The appellant challenged this order.

The appellant argued that previous Tribunal judgments supported their position, emphasizing that Rules do not mandate duty-free clearance under Notification No. 44/2001-CE (NT) for Cenvat credit eligibility. They cited precedents and settled law to support their claim. The Department defended the Commissioner's order.

The Tribunal analyzed the issue, noting that the same matter was previously decided in favor of the appellant by a Mumbai Bench. They highlighted that the duty amount paid by suppliers cannot be contested by the recipient unit for Cenvat credit eligibility, as per Supreme Court precedent. Since there was no evidence of duty refund to suppliers, denying Cenvat credit to the appellant was unjustified. Consequently, the Tribunal set aside the impugned order, allowing the appeal and stay application.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing the legality of availing Cenvat credit based on duty paid by domestic suppliers against invalidated Advance Authorization. The decision was supported by previous judgments and established legal principles regarding duty determination and credit eligibility.