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2017 (8) TMI 1263 - AT - Central ExciseCENVAT credit - non-payment of duty by supplier - case of the department is that the CENVAT credit which the appellants has availed in respect of the duty which was not paid by the supplier therefore the appellant is not entitled to the CENVAT credit - Held that - the fact is not under dispute that appellant have bonafidely purchased the goods, with cover of valid duty paying invoice and payment of the entire amount of invoices to the supplier. The input covered under invoice was received and used by the appellants. In these facts, irrespective of whether the supplier has discharged the duty in time or otherwise, the eligibility of the cenvat credit to the appellants cannot be disputed. This issue has been clarified by the Board in the circular dated 15.12.2003 referred by the appellants - the Board has clarified the due to non-payment of duty by the supplier, action against the consignee to recover the CENVAT credit availed in such cases need not be resorted to as long as the bonafide nature of the transaction is not disputed. In the present case, there is no dispute about the bonafide nature of the transaction. Appeal allowed - decided in favor of appellant.
Issues:
1. Entitlement to cenvat credit when duty not paid by supplier. 2. Reasonable steps required for availing cenvat credit. 3. Applicability of Board circular on recovery of dues in default cases. 4. Dispute resolution on cenvat credit availed in good faith. 5. Time-barred demand in issuing Show Cause Notice. Issue 1: Entitlement to cenvat credit when duty not paid by supplier The department contended that cenvat credit availed by the appellant, despite the duty not being paid by the supplier, should not be allowed. The appellant argued that they had purchased goods with valid duty-paying invoices and had paid the supplier in full. The Tribunal found that the eligibility of cenvat credit cannot be disputed if the appellant received and used the input covered under the valid invoice, regardless of the supplier's duty payment status. The Tribunal referred to a Board circular stating that action against the consignee to recover cenvat credit need not be taken if the transaction is bona fide, as in this case. Issue 2: Reasonable steps required for availing cenvat credit The appellant contended that they had taken reasonable steps by paying the entire invoice amount to the supplier and should not be penalized for the supplier's non-payment of duty. The Tribunal agreed, emphasizing that the appellant had acted in good faith by following Rule 7 of the Cenvat Credit Rules. The Tribunal also noted that the appellant had verified the duty payment status with valid invoices and had fulfilled their obligations. Issue 3: Applicability of Board circular on recovery of dues in default cases The Tribunal extensively discussed a Board circular dated 15.12.2003, which clarified the recovery of dues in cases of default in monthly payment of duty. The circular emphasized that the consignee need not reverse cenvat credit if the transaction is bona fide, even if the supplier defaults in duty payment. The Tribunal relied on this circular to support the appellant's entitlement to cenvat credit in the present case. Issue 4: Dispute resolution on cenvat credit availed in good faith The Tribunal referenced a previous case involving a similar issue where the appellant's appeal was allowed based on the bona fide nature of the transaction. The Tribunal highlighted that the appellant had taken all reasonable precautions before availing cenvat credit and had paid the excise duty amount to the supplier in good faith. The Tribunal concluded that the appellant should not be directed to reverse the cenvat credit, as held by the lower authorities. Issue 5: Time-barred demand in issuing Show Cause Notice The Tribunal noted that the demand in this case was time-barred as the Show Cause Notice was issued beyond the period of limitation. This further supported the Tribunal's decision to set aside the impugned order and allow the appeal in favor of the appellant. In conclusion, the Tribunal ruled in favor of the appellant, emphasizing their good faith actions, compliance with rules, and the bona fide nature of the transaction. The Tribunal highlighted the importance of verifying duty payment status, taking reasonable steps, and following relevant circulars in determining entitlement to cenvat credit.
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