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2024 (12) TMI 6 - AT - Central ExciseCENVAT credit - denial of credit paid by sender units, based on the allegation that sender units inflated the value of Soap Noodles stock transferred to the appellants, as compared to the cost of such materials debited by each of the sender units, and the appellants took excess credit - recovery alongwith interest and penalty - whether appellant is entitled to take Cenvat credit of duty paid on inputs in terms of Rule 3 of Cenvat Credit Rules, 2004 or not? - HELD THAT - Admittedly, the appellant has paid duty on the invoices issued by the sender unit of 115% / 110% of the cost of production in terms of Rule 8 of Valuation Rules, therefore, the appellant is entitled to take cenvat credit of what duty they have paid. The said issue has been examined by the Hon ble Punjab Haryana High Court in the case of VG. STEEL INDUSTRY VERSUS CCE 2011 (5) TMI 154 - PUNJAB AND HARYANA HIGH COURT , wherein the Hon ble High Court has observed 'even if the duty has been paid in excess of the amount finally held to be payable, unless the excess duty paid has been refunded, the assessee could claim cenvat credit as the department could not get the duty twice'. Thus, the appellant has correctly taken the cenvat credit as higher duty paid by the supplier which has not been challenged by the Revenue and not the higher duty paid has been refunded to the sender unit. The Cenvat credit of duty paid on procurement of inputs is admissible and cannot be asked to reverse. In these circumstances, no penalty can be imposed on the appellants - the impugned order is set aside - appeal allowed.
Issues:
Whether the appellant is entitled to take Cenvat credit of duty paid on inputs in terms of Rule 3 of Cenvat Credit Rules, 2004. Analysis: The appeal involved a dispute regarding the appellant's entitlement to take Cenvat credit of duty paid on inputs procured from sister units on a stock transfer basis. The sender units paid duty on the stock transfer based on the cost of production, including a profit margin of 10% or 15%. The Revenue alleged that the sender units overvalued the assessable value, leading to a dispute on the appellant's eligibility for Cenvat credit under Rule 3 of the Cenvat Credit Rules, 2004. The appellant contended that they had paid duty based on the sender units' invoices and were entitled to take Cenvat credit of the duty paid. The Punjab & Haryana High Court's decision in V.G. Steel Industry v. Commissioner of Central Excise was cited to support the appellant's claim that even if duty was paid in excess, the assessee could claim Cenvat credit as the department could not collect duty twice. The appellant further relied on the decision in Purity Flexpack Ltd., where the Gujarat High Court held that the duty paid by the manufacturer is eligible for Cenvat credit at the receiver's end, even if the supplier paid duty at a higher rate. The Tribunal's decision emphasized that the duty paid by the manufacturer should not be disputed by the Central Excise authorities having jurisdiction over the manufacturer. Following these precedents, the Tribunal concluded that the appellant was entitled to take the Cenvat credit of duty paid by them, as the higher duty paid by the supplier was not challenged by the Revenue and not refunded to the sender unit. Therefore, the Tribunal held that the appellant had correctly availed the Cenvat credit of duty paid on inputs and that no penalty could be imposed on the appellants. Consequently, the impugned orders were set aside, and the appeals filed by the appellants were allowed. The Cross Objection filed by the Revenue was also disposed of accordingly. In summary, the Tribunal ruled in favor of the appellant, allowing them to retain the Cenvat credit of duty paid on inputs procured from sister units, emphasizing the applicability of relevant legal precedents and principles governing Cenvat credit eligibility.
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