2008 (2) TMI 189 - AT - Central Excise

Whether the appellant, who availed credit on inputs as per the invoices, after receiving the same from suppliers is eligible for the same after discount has been given by supplier - trade discount was given by issuing credit notes - there is no short payment of duty or reduction in sale price - department cannot direct the appellant to reverse the credit as the appellants had paid the duty and taken credit which is equivalent to duty shown in the invoice issued by the supplier

Summary

Issues:
Whether the appellant is eligible for Cenvat credit after a discount has been given by the supplier.

Analysis:
The issue in this case revolves around the eligibility of the appellant for Cenvat credit after receiving a discount from the supplier. The supplier provided a trade discount by issuing credit notes for the basic price of the inputs purchased by the appellant. The show cause notice alleged that the credit note resulted in the supply of inputs at a higher price, making the Cenvat credit inadmissible on the entire duty initially paid. The adjudicating authority initially dropped the proceedings, but the revenue filed an appeal with the Commissioner (Appeals).

The Commissioner (Appeals) concluded that when the basic price is reduced, the duties and taxes payable are also reduced, and thus, the Cenvat credit on the reduced price of inputs is not admissible. The appellant argued that the credit note was issued only for the basic price and not for the duty amount. The Departmental Representative contended that any credit note issued is for the price, which includes excise duty paid by the supplier on finished goods clearances. The appellant had availed the credit of duty based on the credit note issued.

Considering the submissions, the Tribunal found that the show cause notice sought to deny credit on the grounds that the initially invoiced price was higher and akin to a deposit. The Tribunal noted that seeking reversal of Cenvat credit amounted to reassessment of goods cleared by the supplier. Referring to past judgments, the Tribunal held that as long as the correct duty was paid based on the assessable value, trade discounts and price reductions cannot be challenged by the department. The Tribunal set aside the impugned order and allowed the appeal in favor of the appellant.

In conclusion, the Tribunal's decision centered on the interpretation of trade discounts, credit notes, and the admissibility of Cenvat credit in light of price reductions by the supplier. The judgment emphasized that as long as the correct duty was paid on the assessable value, the appellant was entitled to avail Cenvat credit even after receiving discounts. The Tribunal relied on past precedents to support its decision and ultimately ruled in favor of the appellant, setting aside the Commissioner (Appeals) order.