2021 (6) TMI 879 - AT - Central Excise

CENVAT Credit - supplementary invoices - goods cleared to sister concern on stock transfer basis - contravention of Rule 9 of the Cenvat Credit Rules, 2004 - HELD THAT - M/s.Jai Balaji Industries Ltd. (Unit-I) was initially discharging their duty on the goods cleared to their sister concern on stock transfer basis, sales price to independent buyers during the relevant period. However, at the instance of the department, M/s.Jai Balaji Industries Ltd. (Unit-I) discharged their differential duty on the revised assessable value taking into consideration 110% of the cost of manufacture of the goods as per Rule 9 read with Rule 8 of Central Excise Act Valuation Rules, 2000. This has resulted in payment of differential duty. After discharging differential duty they had issued supplementary invoices in favour of the appellant-assessee on which the appellant-assessee had availed Cenvat credit - Rule 9(1)(b) of the Cenvat Credit Rules, 2004 prescribes that Cenvat credit availed on subsequent invoices involving sale of goods is denied in the circumstances where suppression of fact, misstatement etc. are involved. In the present case there is no sale of goods, but the differential duty has been paid on stock-transfer of goods by M/s.Jai Balaji Industries Ltd. (Unit-I) to the appellant-assessee - the entire exercise is revenue neutral and therefore Cenvat credit cannot be denied on the supplementary invoices issued to the sister concern for the differential duty paid - Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Alleged inadmissible Cenvat credit on supplementary invoices
- Disallowance of credit and demand confirmation
- Imposition of penalty under Cenvat Credit Rules
- Appeal rejection by Commissioner(Appeals)
- Interpretation of Rule 9(1)(b) of Cenvat Credit Rules
- Application of Karnataka High Court judgment on stock transfer

Analysis:
1. The case involved the appellant, a steel products manufacturer, accused of wrongly availing Cenvat credit on supplementary invoices for sponge iron. The show cause notice alleged contravention of Rule 9 of Cenvat Credit Rules, 2004. The adjudicating authority disallowed the credit, confirmed the demand, and imposed penalties under relevant provisions. The appeal to the Commissioner(Appeals) was rejected, leading to the present appeal before the Tribunal.

2. The appellant's representative argued that the supplementary invoices were issued for differential duty payment by the principal manufacturer, which was duly reflected in statutory returns. They contended that proper invoices and disclosures precluded denial of Cenvat credit. Additionally, they emphasized that the differential duty payment was accepted as regular, negating any suppression of facts and unwarranted penalties.

3. The Tribunal noted that the principal manufacturer paid differential duty on stock transfers to the appellant, not on sales to independent buyers. Referring to Rule 9(1)(b) of Cenvat Credit Rules, the Tribunal found no suppression or misstatement in the case. Citing a Karnataka High Court judgment, the Tribunal held that the issue was settled, and Cenvat credit could not be denied for differential duty paid on stock transfers.

4. Ultimately, the Tribunal concluded that the exercise was revenue neutral, and the Cenvat credit on supplementary invoices for the differential duty paid could not be denied. Accordingly, the impugned orders were set aside, and the appeal by the appellant was allowed with any consequential relief.