2008 (5) TMI 230 - AT - Central Excise

Eligibility to the Cenvat Credit on two supplementary invoices held that the prohibition to take credit on supplementary invoices operates only in the case of sale. In the case of stock transfer, prohibition under Rule 7(1)(b) of the Cenvat Credit Rules is not applicable, even if additional amount of duty becomes recoverable from one unit on account of fraud, suppression of facts, etc. hence denial of credit on the impugned two supplementary invoices is not in order

Summary

Issues involved:
Eligibility for Cenvat Credit on supplementary invoices; Applicability of Rule 7(1)(b) of the Cenvat Credit Rules, 2002; Denial of Cenvat credit by Commissioner (Appeals); Imposition of penalty and interest.

Analysis:

Issue 1: Eligibility for Cenvat Credit on supplementary invoices
The main issue in this appeal was the eligibility of the appellant to claim Cenvat Credit amounting to Rs. 2,45,427/- on two supplementary invoices issued by M/s. Godrej Consumers Products Ltd. to M/s. Godrej Industries Ltd. The Commissioner (Appeals) had denied the Cenvat credit on the grounds of short recovery of duty due to wilful misstatement/suppression of facts, invoking Rule 7(1)(b) of the Cenvat Credit Rules, 2002.

Issue 2: Applicability of Rule 7(1)(b) of the Cenvat Credit Rules, 2002
The Tribunal referred to a previous case law involving M/s. Karnataka Soaps and Detergents Ltd. v. CCE, where it was held that the prohibition to take credit on supplementary invoices applies only in the case of sale. In the case of stock transfer, the prohibition under Rule 7(1)(b) does not apply, even if additional duty becomes recoverable due to fraud or suppression of facts. Applying the ratio of this case law to the present case, the Tribunal concluded that the denial of Cenvat credit on the supplementary invoices was not justified, and the appellants were entitled to claim the credit amount.

Issue 3: Denial of Cenvat credit by Commissioner (Appeals)
The Commissioner (Appeals) had not allowed the Cenvat credit and imposed a penalty along with interest on the appellants. However, the Tribunal set aside the impugned order, ruling in favor of the appellants and holding that they were indeed eligible for the Cenvat credit amount of Rs. 2,45,427/-. Consequently, the imposition of penalty and interest was also set aside.

Conclusion:
In conclusion, the Tribunal allowed the appeal, setting aside the decision of the Commissioner (Appeals) and holding that the appellants were entitled to the Cenvat credit on the two supplementary invoices. The Tribunal's decision was based on the interpretation of Rule 7(1)(b) and the application of relevant case law, emphasizing the distinction between sale transactions and stock transfers in the context of claiming Cenvat credit.