2007 (11) TMI 118 - AT - Central Excise

Subsequent to the clearance of the goods assessee raised supplementary invoices for additional amount on ground that they have used more materials than what was expected at time of contract- no allegation of price variation clause - Further, the supplementary invoices haven t been honoured - so the transaction price hasn t been altered demand unsustainable - No evidence to show that inputs removed as such were manufactured so the reversal of credit taken at the original price is enough

Summary

Issues:
1. Reversal of Cenvat credit on spares supplied by the appellant
2. Demand of duty on supplementary invoices for manway plugs

Analysis:

Issue 1: Reversal of Cenvat credit on spares supplied by the appellant
The appellant supplied spares valued at Rs. 19 lakhs after manufacturing and selling raw materials procured at Rs. 13 lakhs. The department sought differential duty based on the assertion that the appellant should have paid duty on the higher value of Rs. 19 lakhs. The appellant argued that they supplied the inputs as spares without manufacturing them in their factory, only adding their profit margin. They reversed the Cenvat credit taken on the inputs as required by law. The Tribunal agreed with the appellant, stating that there was no evidence to prove that the spares were manufactured by the appellant, thus the reversal of credit at the original procurement price was lawful.

Issue 2: Demand of duty on supplementary invoices for manway plugs
The appellant supplied manway plugs at a specific price as per contract but later raised supplementary invoices for additional amounts, citing increased material usage and work beyond the contract terms. However, these supplementary invoices were not honored by the buyer. The department sought duty payment based on the raised invoices, arguing that duty becomes payable once an invoice is issued, regardless of payment. The appellant referenced a Supreme Court decision and contended that duty liability cannot change post-clearance due to price variations without a specific clause in the contract. The Tribunal agreed with the appellant, noting that there was no price variation clause in the original contract, and the non-honored supplementary invoices did not alter the transaction price. Citing the Supreme Court decision, the Tribunal ruled in favor of the appellant, allowing the appeal on both grounds with any consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant on both issues, emphasizing the importance of legal compliance and contract terms in determining duty liabilities post-clearance.