2016 (7) TMI 551 - AT - Central Excise

Cenvat Credit - Damage compensation given by the supplier of capital goods - whether dis-entitled to Appellant taking corresponding credit to the Appellant - Held that - In view of CBEC vide Circular No.877/15/2008-CX dated 17.11.2008 any reduction in prices will not disentitle the recipient from taking full Cenvat Credit of duty shown in the invoices. In the present case it is not even the case of reduction in prices of the capital goods and the amount received by the Appellant represents compensation given by the supplier of the capital goods for delay in commissioning of the project. There is no evidence on record that the supplier of the capital goods obtained any refund with respect to the duty paid on capital goods, indicated in the invoices, on which Cenvat Credit is taken. In the light of case law relied upon by the Appellant and CBEC Circular dated 17.11.2008 Cenvat Credit availed by the Appellant cannot be reduced on account of damages received by the Appellant from the supplier of capital goods.

Summary

Issues:
Whether the compensation received by the appellant from the supplier of capital goods will affect the admissibility of Cenvat Credit.

Analysis:
The appeal was filed against an Order-in-Appeal dated 11.10.2011, which upheld an Order-in-Original from 17.09.2010. The appellant availed Cenvat Credit on capital goods related to their cold rolling mill in 2006. They received compensation of ?1,00,00,000 from the supplier due to a delay in project completion, as per the agreement terms. The appellant argued that this compensation did not impact the assessable value of the capital goods, making the Cenvat Credit admissible. They cited the case of Bajaj Auto Ltd. vs. Commissioner of C.Ex. & Cus., Aurangabad and a CBEC Circular to support their claim.

The issue in question was whether the compensation received by the appellant would disentitle them from claiming the corresponding Cenvat Credit. The appellant relied on the case law mentioned earlier, which stated that any subsequent reduction in the price of inputs with retrospective effect would not prevent the recipient from taking full Cenvat Credit. The CBEC Circular dated 17.11.2008 also clarified that the duty paid by the manufacturer, as shown in the invoice, would be available as credit regardless of any price reduction later on.

After hearing both sides and examining the case records, it was concluded that the compensation received by the appellant did not lead to a reduction in the prices of the capital goods. The amount received was for the delay in project completion, not a price reduction. There was no evidence that the supplier had obtained any refund on the duty paid on the capital goods. Therefore, based on the case law and the CBEC Circular, the Cenvat Credit availed by the appellant could not be reduced due to the compensation received from the supplier.

As a result, the appeal was allowed, and the Order-in-Original dated 11.10.2011 was set aside.