2008 (7) TMI 230 - AT - Central Excise

Reduction of the price of the inputs with consequential reduction of assessable value at the end of the input-supplier SCN issued to the appellants (manufacturer of final products) alleging that they were entitled to avail input-duty credit only to the extent of the duty leviable on the inputs held that revenue s proposal for recovery of the excess credit, is not justified since duty had already been paid by appellant, excess credit cannot be recovered by revenue appeal allowed

Summary

Issues:
1. Denial of CENVAT credit to the appellant for a specific period.
2. Imposition of penalty on the appellant.
3. Interpretation of the phrase "duty leviable and paid" under Rule 3(1) of the CENVAT Credit Rules, 2002/2004.

Analysis:

1. The appellant's appeal was against the denial of CENVAT credit amounting to over Rs.1.6 crores for a particular period and the imposition of a penalty equal to that amount. The appellant had availed CENVAT credit on inputs based on duty paid as per statutory invoices. However, a show-cause notice was issued by the department, claiming that the appellant was only entitled to credit based on the duty 'leviable' on the inputs after a reduction in the price of the inputs. The dispute centered around the interpretation of the term 'leviable' in Rule 3(1) of the CENVAT Credit Rules.

2. In a similar case, Final Order No. 465/08 dated 9-5-2008 had held that MODVAT/CENVAT credit of duty paid by the input-manufacturer or supplier, supported by relevant invoices, was permissible under the CENVAT Credit Rules for a manufacturer of the final product. This decision provided a precedent for the interpretation of the relevant provisions.

3. The Tribunal, after considering the previous decision, set aside the impugned order and allowed the appeal. The Tribunal emphasized that the CENVAT credit on inputs is available to a manufacturer to the extent of the duty leviable on such inputs and paid by the input manufacturer/supplier. The clear meaning of the phrase "duty leviable and paid" under Rule 3(1) of the CENVAT Credit Rules was crucial in resolving the dispute in favor of the appellant. The judgment highlighted the importance of understanding the specific language and requirements outlined in the rules to determine the eligibility for CENVAT credit accurately.