2017 (3) TMI 1406 - AT - Central Excise

CENVAT credit - supplementary invoices issued by the vendor - Held that - As the allegation of suppression is not sustainable against the vendors, therefore, the appellant cannot be denied cenvat credit on additional duty paid by the vendors on account of increase in the amortization cost of moulds and dies - credit rightly availed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of cenvat credit on supplementary invoices issued by the vendor due to alleged suppression of facts and misstatement by the vendor.

Analysis:
The appellant imported goods under the EPCG scheme and supplied them to their vendor on a free of cost basis. The vendor was supposed to pay additional duty on the amortization cost of the goods due to the appellant's payment of customs duty. The vendor initially did not pay this additional duty until pointed out by the department, resulting in the issuance of supplementary invoices. The appellant availed cenvat credit based on these invoices. Subsequently, a show cause notice was issued to the vendor for alleged suppression of facts, leading to short payment of duty. Another notice was issued to the appellant to deny cenvat credit under Rule 7(1)(b) of the Cenvat Credit Rules, citing fraud and misstatement by the vendor. The appellant challenged this denial, arguing that there was no suppression of facts by the vendor, as established in a previous Tribunal ruling.

The Tribunal examined whether the charge of suppression or mala fide intention for short payment of duty was sustainable against the vendors. Referring to the case of M/s Mark Auto Industries Ltd., the Tribunal observed that the vendors had not included duties and interest in the cost of goods initially, and the cost was raised later due to duty payment by the appellant. The Tribunal concluded that there was no malafide intention on the part of the vendors and set aside the penalties imposed. Additionally, the Tribunal cited the case of Bright Brothers Pvt. Ltd., where it was held that while duty demand was confirmed, penalties were not sustainable on vendors for short payment. Based on these precedents, the Tribunal held that the allegation of suppression against the vendors was not sustainable, allowing the appellant to rightfully claim cenvat credit on the additional duty paid by the vendors.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal with consequential relief. The judgment emphasized that since the vendors did not act with malafide intention and penalties were not warranted, the appellant was entitled to the cenvat credit for the additional duty paid by the vendors.