2006 (6) TMI 11 - AT - Central Excise

Central Excise - Job worker paid differential duty on raw material to the appellant and issued supplementary invoice - No case of suppression or misstatement of facts - Credit of differential duty paid on supplementary invoice is allowable

Summary

Issues:
Dispute over Modvat credit availed based on supplementary invoices by job worker.

Analysis:
1. The appellant, engaged in manufacturing, availed Cenvat Credit and supplied CRCA sheets to job workers for manufacturing parts of tractors. The cost of sheets was revised, but the assessable value of fenders was not updated by the job worker initially.
2. Lower authorities held that Rule 7 (1) (b) of Cenvat Credit Rules 2002 barred the appellant from availing credit based on supplementary invoices. Appellant argued that the rule only applies in cases of fraud, collusion, or willful misstatement, which were absent in this situation.
3. Authorities did not find evidence of duty non-payment due to reasons specified in Rule 7 (1) (b). The job worker rectified the situation voluntarily, paying the due amount and interest. The Tribunal emphasized that the burden of proving recoverability due to suppression or fraud lies on the Revenue.
4. The Tribunal noted that the situation arose from a lapse by the job worker, not intentional evasion. The appellant's actions to increase raw material cost indicate no intention to evade duty payment. Rule 7 (1) (b) is intended for cases of clandestine activities confirmed through adjudication.
5. The Tribunal found no motive for the job worker to exclude the enhanced sheet cost from the assessable value, as the appellant was benefiting from Modvat credit, maintaining a revenue-neutral position. Hence, the Tribunal allowed the appeal, overturning the lower orders.

This judgment clarifies the application of Rule 7 (1) (b) in the context of Modvat credit disputes and emphasizes the need for evidence of fraud or suppression to deny credit. It highlights the importance of intent in duty-related lapses and the burden of proof on the Revenue in alleging misconduct.