2017 (4) TMI 274 - AT - Central Excise

CENVAT credit - The Department viewed that the appellants did not take correct amount of credit as the duty paid excess should be considered as a deposit in terms of Section 11D not eligible for credit u/r 3 of CCR, 2004 - Held that - When the payment of duty by the appellants has not been disputed and the Department entertained a view that there could be some possible refunds at the supplier s side, it is for the Department to verify the facts of the case at the supplier s end. It is not for the appellant to establish sanction or otherwise of any refund to the suppliers. We find that the lower Authorities misdirected themselves and passed legally unsustainable orders. Accordingly, the impugned order is set aside and the matter is remanded back to the Original Authority to verify the facts and pass fresh orders - appeal allowed by way of remand.

Summary

Issues:
- Dispute regarding duty payable on goods purchased and credit availed by the appellant.
- Interpretation of Section 11D and Rule 3 of Cenvat Credit Rules, 2004.
- Onus of proving refund claim at the supplier's end.
- Legality of confirming demand without proper verification.
- Remand to Original Authority for fresh orders.

Analysis:
The appeal before the Appellate Tribunal CESTAT New Delhi involved a dispute related to the duty payable on goods purchased by the appellant, a manufacturer of colour television sets, and the Cenvat credit availed by them. The Department contended that the appellant did not correctly account for the excess duty paid, considering it as a deposit under Section 11D and not eligible for credit under Rule 3 of the Cenvat Credit Rules, 2004. The Original Authority confirmed a duty demand of &8377;41,97,338/- and imposed an equivalent penalty. On appeal, the Commissioner (Appeals) upheld the original order, leading to the present appeal.

The Tribunal noted that the Original Authority reconsidered the case based on a remand direction from the Commissioner (Appeals) to examine if the debit notes issued by the appellant resulted in any refund claim or sanctioned differential duty at the supplier's end. The Commissioner (Appeals) emphasized that if no refund was sanctioned at the supplier's end, the Cenvat credit taken by the appellant should not be disturbed. However, the Original Authority placed the burden on the appellant to prove that no refund was claimed by the suppliers, without receiving any confirmatory clarification. The Tribunal found this approach legally unsustainable, as the duty was paid by the appellant as per the supplier's invoices, and the subsequent debit notes indicated a discrepancy in the duty paid. The Tribunal criticized the lower authorities for not verifying the facts at the supplier's end and confirmed the demand based on flawed reasoning.

Consequently, the Tribunal set aside the impugned order and remanded the matter back to the Original Authority for fresh orders. The Tribunal clarified that if there is no evidence of a refund claim or sanction at the supplier's end, the Cenvat credit availed by the appellant cannot be denied unless there are other valid grounds. The Tribunal emphasized that it is the Department's responsibility to verify such claims and not the appellant's duty to establish the absence of refunds. Therefore, the appeal was allowed by way of remand to ensure proper verification and a legally sound decision by the Original Authority.