2007 (8) TMI 213 - AT - Central Excise

Impact of incentive passed on cenvat credit Incentive passed by two Public corporation as per their policy Credit of duty already allowed not be called back or curtailed

Summary

Issues:

1. Whether the credit of duty already allowed to the Respondent can be called back or curtailed.

Analysis:

The judgment revolves around the issue of whether the credit of duty already allowed to the Respondent can be revoked or reduced. The ld. JDR for Revenue argued that the ld. Commissioner (Appeals) erred in law by holding that the credit cannot be curtailed. The Revenue contended that the order of adjudication, properly passed, should be restored. On the other hand, the Respondents, represented by ld. Sr. Counsel Mr. Khaitan, argued that the duty was paid to public sector companies like HPCL and IOC, and the credit was rightfully availed against duty liability. It was emphasized that there was no unfair play by the public authorities in granting the credit note as an incentive. The Respondents should not be asked to surrender the credit already availed due to the incentive provided by the public sector companies as part of their sales policy.

The Tribunal, after hearing both sides and examining the record, noted that the incentive provided by the public corporations was in line with their sales policy and aimed at incentivizing targeted sales. The appellant, as a beneficiary of this policy, availed trade discounts without affecting the duty liability. It was established that the incentive was not a duty reduction meant to be repaid to the exchequer. Therefore, the Respondent was entitled to retain the benefit accrued to them through the incentive, and it was deemed unreasonable to allow the appeal of the Revenue. The judgment concluded that the appeal of the Revenue should fail based on the observations made regarding the nature of the incentive and its impact on duty liability.

This judgment highlights the importance of understanding the nature of incentives provided by public sector entities and how they interact with duty liabilities. It underscores the principle that incentives granted as part of sales policies should not be treated as duty reductions to be reclaimed from the recipients. The decision provides clarity on the rights of taxpayers in such scenarios and emphasizes the need for a fair and consistent application of tax laws and policies.