2024 (1) TMI 1117 - AT - Central Excise

Refund of duty paid - reversal of CENVAT credit availed on the basis of diverted invoice - endorsed invoices - proper document for claiming Central Excise refund under Rule 9(1)(a)(i) of the Rules - HELD THAT - The Bombay High Court in the case of MARMAGOA STEEL LTD. VERSUS UNION OF INDIA 2005 (4) TMI 89 - HIGH COURT OF JUDICATURE AT BOMBAY had held that input credit was not deniable to assessee endorsed in the name of the person claiming the credit. This case law was however in the context of Bill of Entry endorsement, and not that of the invoices issued by a manufacturer, as it was a case pertaining to import. Nonetheless what is material is the said difference in the nature of document would not alter the situation about the duty paid character of the goods as well as their utilization in the finished product. The Hon ble Bombay High Court therein had distinguished the Larger Bench s decision in the case of BALMER LAWRIE CO. LTD. VERSUS COMMISSIONER OF C. EX., KANPUR 2000 (1) TMI 74 - CEGAT, NEW DELHI where it was held that The very object of issuance of Notification No. 32/94 referred to above and insertion of Rules 57GG and 174 requiring the registration of the dealer dealing with the excisable goods, would stand defeated and nullified if these are taken to be only procedural and not mandatory/ imperative in character and enforcement. Distinguishing, the said LB decision of the Tribunal, the Hon. High Court in the case of MARMAGOA STEEL LTD. VERSUS UNION OF INDIA 2005 (4) TMI 89 - HIGH COURT OF JUDICATURE AT BOMBAY , while recording its findings had held that In the absence of any provision regarding endorsement on the bill of entry, the credit of duty cannot be denied on the ground that the bill of entry is not endorsed in the name of the claimant. As stated hereinabove, what is required to be established for taking credit of duty is that the goods used as inputs are duty paid and that the credit of duty paid on the said goods has not been taken. As long as various ingredients regarding duty paid character of the goods are clearly established and there is no dispute about their utilization in the manufacture of finished goods, thereby indicating the necessary compliance of the act and the rules, no offence can be taken to the legitimate availment of credit. It is further noticed that there are slew of case laws GAUTAM WEAVING MILLS VERSUS COMMISSIONER OF C. EX., BELAPUR 2008 (1) TMI 771 - CESTAT, MUMBAI , SIMPLEX MILLS CO. LTD. VERSUS CCE 2007 (6) TMI 513 - BOMBAY HIGH COURT , allowing credit on the basis of endorsed duty paid document as long as all material particulars required to be incorporated in terms of erstwhile Rule 52A of the Central Excise Rules and the physical receipt of the said goods were clearly established and not in dispute. Thus, the substantial benefit cannot be disallowed for an alleged irregularity as may have been pointed out by the department in the impugned Show Cause Notice. Mere endorsement of an invoice does not amend or alter the key essentials and characteristics of a validly issued invoice. The order of Commissioner (Appeals) is set aside and the appeal is allowed.

Summary

Issues Involved:
1. Eligibility of Cenvat Credit on Endorsed Invoices
2. Interpretation of Rule 9(1)(a) of the Cenvat Credit Rules, 2004
3. Applicability of Previous Judgments and Notifications

Summary:

1. Eligibility of Cenvat Credit on Endorsed Invoices:
The primary issue in this case was whether the appellant was eligible to avail Cenvat Credit based on endorsed invoices. The appellant had received sponge iron from M/s N. E. Thermion (P) Ltd. on endorsed invoices. The Revenue argued that the invoices were "diverted" and not proper documents for claiming Cenvat Credit under Rule 9(1)(a)(i) of the Cenvat Credit Rules, 2004. The Adjudicating Authority initially allowed the credit, but the Commissioner (Appeals) set aside this decision, citing the Gujarat High Court's ruling in Commissioner of Central Excise & Customs Vs. Marigold Coatings Pvt. Ltd., which held that Cenvat Credit on endorsed invoices was not permissible.

2. Interpretation of Rule 9(1)(a) of the Cenvat Credit Rules, 2004:
The case hinged on the interpretation of Rule 9(1)(a) of the Cenvat Credit Rules, 2004, which outlines the documents on which Cenvat Credit can be taken. The appellant argued that the rule allows credit on invoices issued by a manufacturer for clearance of inputs or capital goods. The Adjudicating Authority supported this view, stating that as long as the duty-paid nature of the inputs and their receipt in the factory were undisputed, credit should be allowed, even on endorsed invoices. This view was supported by various judgments, including M/s. Gautam Weaving Mills vs. Commissioner of Central Excise and Deepthi Insulated Cables Vs. CCE.

3. Applicability of Previous Judgments and Notifications:
The Commissioner (Appeals) relied on the Gujarat High Court's decision, which was based on the Larger Bench's ruling in Balmer Lawrie & Co. Ltd. Vs. CCE, Kanpur, and Notification No. 32/94 dated 04/07/1994. These precedents held that invoices could only be issued by registered dealers post-1994. However, the appellant cited several cases, including Schlafhorst Engineering (I) Ltd. Vs. Commr. of C. Ex & Cus. Vadodara and Union of India Vs. Rajasthan Spinning & Weaving Mills Ltd., which allowed credit on endorsed invoices under specific circumstances. The Tribunal noted that the duty-paid character of the goods and their utilization in the manufacture of finished goods were not in dispute, and substantial benefit could not be denied merely on the basis of an endorsed invoice.

Conclusion:
The Tribunal concluded that substantial benefit could not be disallowed for an alleged irregularity pointed out by the department. The order of the Commissioner (Appeals) was set aside, and the appeal was allowed with consequential relief as per law. The Tribunal emphasized that an endorsed invoice does not alter the key essentials of a validly issued invoice, and the appellant was entitled to avail Cenvat Credit.