2024 (2) TMI 613 - AT - Central Excise

CENVAT Credit - duty paying documents - existence of cause of action or not - credit availed on the strength of supplementary invoices issued by the supplier as per Rule 9(1) (b) of the CENVAT Credit Rules, 2004 - fraud, collusion or wilful misstatement or suppression of facts or not - HELD THAT - The entire cause of action against the appellant herein being that the supplementary invoices were issued by NEI in respect of the duty short paid by reason of fraud, collusion, wilful misstatement or suppression of facts. Once the order against NEI has been set aside by this Tribunal, nothing survives to support the allegations in the SCN, the Order in Original or the impugned order in this appeal. The impugned order, therefore, needs to be set aside as the cause of action no longer exists and the appellant had correctly availed CENVAT credit on the strength of the supplementary invoices issued by NEI. The impugned order is, accordingly, set aside - Appeal allowed.

Summary

Issues:
The issues involved in the judgment are the denial of CENVAT credit to the appellant based on supplementary invoices issued by the supplier, NEI, due to alleged short payment of duty by reason of fraud, collusion, wilful misstatement, or suppression of facts.

Comprehensive Details:

1. The appellant, a manufacturer of Bearing Rings, availed CENVAT credit on inputs used in manufacturing, supplied by NEI, Jaipur. NEI paid Additional Duty of Customs following an audit and issued supplementary invoices to the appellant for the same, enabling the appellant to avail CENVAT credit.

2. CENVAT credit can be availed based on supplementary invoices as per Rule 9(1)(b) of the CENVAT Credit Rules, 2004, except where duty was not paid or short paid due to specific reasons such as fraud, collusion, wilful misstatement, or contravention of Customs or Excise Act provisions to evade duty payment.

3. The Revenue contended that NEI short paid duty due to fraud, collusion, wilful misstatement, or suppression of facts, making the appellant ineligible for CENVAT credit based on NEI's supplementary invoices. SCNs were issued to NEI and the appellant for recovery of differential duty and penalty imposition.

4. A Tribunal decision favored NEI in a separate case, setting aside penalties imposed on NEI for short payment due to fraud. The appellant argued that since NEI's penalties were overturned, the basis for denying CENVAT credit to the appellant no longer existed.

5. The Tribunal acknowledged the Tribunal's decision in favor of NEI, concluding that the cause of action against the appellant, based on NEI's alleged duty short payment, ceased to exist. Consequently, the impugned order denying CENVAT credit to the appellant was set aside, allowing the appeal with consequential benefits to the appellant.

The judgment highlights the importance of adherence to legal provisions in availing CENVAT credit, specifically in cases where duty payment issues arise with suppliers. The decision emphasizes the need for a clear nexus between duty payment discrepancies of suppliers and the entitlement of recipients to avail credits, ensuring fair treatment and adherence to statutory requirements in indirect tax matters.