2018 (12) TMI 1782 - AT - Central Excise

CENVAT credit - duty paying invoices - Supplementary invoices issued by M/s. HLL at the time of payment of differential duty - periods April 2001 to March 2002 and June 2002 to March 2003 - Rule 7 (1)(b) of the Cenvat Credits, 2002 - HELD THAT - In the Tribunal s decision in the case of KARNATAKA SOAPS DETERGENTS LTD. VERSUS CCE., MYSORE/BANGALORE 2005 (6) TMI 182 - CESTAT, BANGALORE , the Tribunal has taken the view that the ban on taking credit of supplementary invoices operate only in the case of sale. In the case of Stock Transfer, prohibition under Rule 7 (1)(b) of Cenvat Credit Rules held as not applicable - The Tribunal s decision in the case has also been upheld by the Hon ble Karnataka High Court in KARNATAKA SOAPS AND DETERGENTS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE 2010 (2) TMI 524 - KARNATAKA HIGH COURT . Appeal dismissed - decided against Revenue.

Summary

Issues:
- Entitlement to Cenvat Credit on the basis of supplementary invoices issued for payment of differential duty.
- Interpretation of Rule 7(1)(b) of the Cenvat Credit Rules, 2002.
- Application of case laws in determining eligibility for Cenvat Credit.

Analysis:
1. The appellant, engaged in manufacturing small packs of detergent from bulk Detergent Powder, received supplementary invoices from M/s. Hindustan Lever Ltd. for the payment of differential duty. The dispute centered on whether the appellant was entitled to Cenvat Credit based on these supplementary invoices issued in an under-valuation case.

2. The Adjudicating Authority, in the impugned orders, dropped the demands raised by the Show Cause Notices, leading to the Revenue challenging these orders through appeals. The primary issue was the validity of availing Cenvat Credit on the basis of the supplementary invoices issued by M/s. HLL for payment of differential duty.

3. The key point of contention was the interpretation of Rule 7(1)(b) of the Cenvat Credit Rules, 2002, which allows Cenvat credit based on supplementary invoices. The Show Cause Notices invoked Rule 7(1)(b) to propose the reversal of credits due to under-valuation detected by the department.

4. The Adjudicating Authority distinguished between Cenvat Credit availed for stock transfers and those for sale of inputs. It was held that in the case of stock transfers, the appellant was entitled to Cenvat Credit, aligning with the findings of various case laws cited by both parties.

5. The respondent relied on several case laws, including Karnataka Soaps & Detergents, Jai Raj Ispat Ltd., and United Phosphorus Ltd., which supported the appellant's position regarding the eligibility for Cenvat Credit in the case of stock transfers.

6. The Tribunal, after perusing the case laws, particularly the Karnataka Soaps & Detergents case, emphasized that the prohibition on availing credit of supplementary invoices only applies in the case of sale, not in stock transfers. The Tribunal's decision was upheld by the Karnataka High Court and was found consistent with other decisions, leading to the rejection of Revenue's appeals.

7. Ultimately, the Tribunal upheld the orders passed by the Lower Authority, citing the applicability of case law precedents and the specific provisions of Rule 7(1)(b) of the Cenvat Credit Rules, 2002, in allowing the appellant to retain the Cenvat Credit availed on the basis of the supplementary invoices issued by M/s. HLL for payment of differential duty.