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Home Case Index All Cases Central Excise Central Excise + AT Central Excise - 2017 (8) TMI AT This

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2017 (8) TMI 1263 - AT - Central Excise


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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