2004 (7) TMI 176 - AT - Central Excise

Summary

Issues:
1. Denial of CENVAT credit on supplementary invoices.
2. Admissibility of CENVAT credit on invoices issued before and after 29-8-2000.
3. Allegations of irregular availment of CENVAT credit.
4. Applicability of Rule 57AE to credit availed prior to 1-3-2001.

Analysis:
1. The appellants entered into a Joint Venture Agreement with another company for the manufacture and sale of gases. The Central Excise Department issued a Show Cause Notice for revising the assessable value of gases due to cost overruns. The appellants availed CENVAT credit on supplementary invoices issued by the other company. An offence case was registered against the appellants for alleged irregular availment of CENVAT credit. The Commissioner confirmed the demand based on the ground that credit can only be availed against invoices where additional excise duty was paid due to cost escalation. The appellants argued that the supplementary invoices were for escalation of the price, which was part of the overall cost of manufacture.

2. The Commissioner held that credit could be availed against supplementary invoices issued after 29-8-2000, subject to conditions. The Departmental Representative argued against the admissibility of credit on invoices issued prior to 29-8-2000. The Commissioner found that the condition for credit availed prior to 1-3-2001 did not apply retrospectively. The Commissioner confirmed the demands based on the grounds of finalisation of provisional assessment or cost escalation. However, the supplementary invoices were issued due to cost escalation as per the agreement between the parties, and the facility charges represented cost overruns for setting up the plant.

3. The Commissioner's order was challenged on the grounds that the supplementary invoices were for escalation of the price, which was part of the project cost. The Commissioner had previously held that facility charges were a mode of financing cost overruns and not an additional consideration. The cost of setting up the plant increased, and the facility charges financed this increase. The appellants correctly took credit on the supplementary invoices issued due to cost escalation. The Tribunal found no merit in the department's pleadings and set aside the Commissioner's order, allowing the appeal.