2007 (9) TMI 172 - AT - Central Excise

Credit availed on basis of supplementary invoices issued by supplier against the additional duty paid on ground of upward revision of price of goods If no case of misdeclaration etc. has been made on supplier, then same cannot be made on receiver s end Credit not deniable u/r 7(1)(b)

Summary

Issues: Denial of Modvat credit on the ground of intentional evasion of duty by the supplier.

Analysis:
1. The appeal was against the denial of Cenvat credit based on supplementary invoices issued by the supplier, IMIL, for additional duty paid due to a price revision. The revenue officers alleged intentional duty evasion by IMIL, making the appellant's credit ineligible under Rule 7 (1) (b) of the Cenvat Credit Rules 2002.

2. The adjudicating authority confirmed the demand, imposed penalties, and ordered interest recovery. The appellant argued that their credit was lawful, citing precedents where modvat credit was not denied in similar situations.

3. The issue revolved around the denial of Modvat credit to the appellant due to IMIL's alleged intentional duty evasion. The Tribunal found that the adjudicating authority, also in charge of IMIL, did not issue a show cause notice to IMIL for the demanded amount or penalty imposition under Section 11AC.

4. Rule 7 (1) (b) states that credit on supplementary invoices can only be denied if duty becomes recoverable due to fraud, collusion, misstatement, or suppression of facts by the manufacturer. Since no such allegations were made against IMIL, and no collusion was proven between the appellant and the supplier, the order-in-original denying credit was deemed unsustainable.

5. The Tribunal referred to a previous case where differential duty was voluntarily paid by the supplier upon departmental pointing out. Without any notice to the supplier or findings of misdeclaration, the denial of credit based on Rule 7 (1) (b) was considered unjustified. The Tribunal ruled in favor of the appellant, setting aside the impugned order.

6. The Tribunal concluded that the issue mirrored a previous Division Bench case, and the decision was in favor of the appellant. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief.