2017 (1) TMI 793 - AT - Central Excise

Reversal of CENVAT credit in case of Trade Discount - discount allowed post clearance - the assessable value of the inputs received was altered, at the end of the manufactures of the inputs - Held that - It is very clear from the circular dated 17/11/2008 that when subsequently the supplier allows some trade discount or reduces the price, without reducing the duty paid by him, the duty paid is admissible as Cenvat Credit - It is undisputed that the duty paid by the input manufacturers remained unaltered in the present case even after issue of credit notes - appeal dismissed - decided against Respondent-assessee.

Summary

Issues:
1. Admissibility of Cenvat Credit on altered assessable value of inputs due to credit notes.
2. Applicability of circular regarding reversal of Cenvat Credit in case of trade discount.
3. Validity of penalty imposed on co-noticees.

Issue 1: Admissibility of Cenvat Credit on altered assessable value of inputs due to credit notes:
The case involved M/s. Super Plastronics Pvt. Ltd. (SPPL) purchasing Color Picture Tubes (C.P.T.) from various suppliers and taking Cenvat Credit under relevant rules. The suppliers issued credit notes to SPPL post-clearance, altering the assessable value of the inputs. The Revenue contended that due to this alteration, the Cenvat Credit availed by SPPL needed to be reduced. A show cause notice was issued to SPPL demanding the disallowance and recovery of Cenvat Credit. The Original Authority confirmed the demand, imposed penalties, and also penalized co-noticees. The appellant argued citing precedents that errors in assessment by manufacturers/suppliers should not affect the credit availability to the receiver, thus interest and penalties were not justified. However, the Original Authority held the case laws cited were not directly applicable.

Issue 2: Applicability of circular regarding reversal of Cenvat Credit in case of trade discount:
The assessee appealed the Original Authority's decision before the Commissioner (Appeals), which was allowed. The Revenue challenged this decision, arguing that the circular No. 877/15/08-Cus did not have retrospective effect, and the transactions in question occurred between April 2002 to March 2006. The circular clarified that when credit notes are issued for trade discounts without reducing the duty paid by the supplier, the duty paid remains admissible as Cenvat Credit. The Tribunal held that the circular clarified existing provisions and was applicable for the entire relevant period, dismissing the Revenue's grounds of appeal.

Issue 3: Validity of penalty imposed on co-noticees:
The Revenue contended that penalty on co-noticees was justified due to the alleged inadmissible Cenvat Credit. However, the Tribunal, after considering the circular and arguments, upheld the decision of the Commissioner (Appeals) and dismissed the appeal. The duty paid by the input manufacturers remained unchanged even after the credit notes were issued, making the duty admissible as Cenvat Credit. The Tribunal found the circular to squarely cover the issue and upheld the Order-in-Appeal, providing consequential relief if necessary.

This judgment clarifies the admissibility of Cenvat Credit in cases where the assessable value of inputs is altered due to credit notes issued by suppliers. The circular regarding reversal of Cenvat Credit in case of trade discounts was deemed applicable for the relevant period, ensuring that duty paid by manufacturers remains admissible as credit even after price reductions. The Tribunal's decision highlights the importance of following established rules and circulars in determining the eligibility of Cenvat Credit, ultimately dismissing the Revenue's appeal and upholding the decision in favor of the assessee.