2007 (11) TMI 58 - AT - Central Excise

Appellant get Exhaust systems mfd. on job work Because of price variation of inputs job worker paid differential duty by raising supplementary invoices on appellant Credit taken by appellant of this diff. duty on strength of these suppl. invoices cannot be denied by invoking Rule 7(1)(b) CCR

Summary

Issues:
1. Disallowance of CENVAT credit under Rule 7(1)(b) of CENVAT Credit Rules, 2001.
2. Levying of interest under Section 11AB of the Central Excise Act.
3. Imposition of penalty under Rule 13 of CENVAT Credit Rules.
4. Dispute between the department and the manufacturer regarding differential duty on exhaust systems.
5. Application of Rule 7(1)(b) to deny CENVAT credit.
6. Allegation of suppression/misstatement of facts with intent to evade duty.

Analysis:

Issue 1: Disallowance of CENVAT credit under Rule 7(1)(b) of CENVAT Credit Rules, 2001
The appellants, engaged in manufacturing motor vehicles, had exhaust systems manufactured on job work basis by another company. The inputs supplied by the appellants were included in the assessable value of the exhaust systems for duty payment by the manufacturer. The department disallowed the CENVAT credit claimed by the appellants, alleging ineligibility under Rule 7(1)(b). The Commissioner confirmed the demand, but the Tribunal found no suppression of facts or misstatement, setting aside the decision and allowing the appeal.

Issue 2: Levying of interest under Section 11AB of the Central Excise Act
The department proposed to levy interest on the disallowed credit amount under Section 11AB. However, the Tribunal's decision favored the appellants, stating that there was no suppression or misstatement of facts by the manufacturer, thereby rejecting the imposition of interest.

Issue 3: Imposition of penalty under Rule 13 of CENVAT Credit Rules
The Commissioner imposed a penalty on the appellants under Rule 13 of CENVAT Credit Rules. The Tribunal, considering the absence of suppression or misstatement, set aside the penalty along with the disallowed credit, providing consequential relief to the appellants.

Issue 4: Dispute between the department and the manufacturer regarding differential duty on exhaust systems
A dispute arose between the department and the manufacturer regarding the differential duty on exhaust systems. The Commissioner confirmed the demand against the manufacturer, but the Tribunal partially allowed the appeal in favor of the manufacturer, indicating a previous case where the Tribunal's decision favored the manufacturer.

Issue 5: Application of Rule 7(1)(b) to deny CENVAT credit
The Tribunal analyzed Rule 7(1)(b) of the CENVAT Credit Rules, emphasizing that the exception provided in the rule, related to suppression or misstatement of facts with intent to evade duty, did not apply to the present case. The Tribunal held that the manufacturer did not suppress facts, allowing the CENVAT credit claimed by the appellants.

Issue 6: Allegation of suppression/misstatement of facts with intent to evade duty
The Tribunal concluded that there was no suppression or misstatement of facts by the manufacturer in their transactions with the appellants. As such, the Tribunal set aside the disallowance of CENVAT credit, ruling in favor of the appellants due to the absence of intent to evade duty.

In conclusion, the Tribunal's judgment favored the appellants by rejecting the disallowance of CENVAT credit, interest, and penalty, citing the absence of suppression or misstatement of facts by the manufacturer. The decision was based on a detailed analysis of relevant provisions and previous cases, providing relief to the appellants in the disputed matter.