2015 (10) TMI 126 - AT - Central Excise

Denial of CENVAT Credit - Supplementary invoices - violation of Rule 9(1)(b) of the Cenvat Credit Rules - Held that - Preventive Officers during their visit detected the transfer of goods from Unit-1 to Unit-2 on the payment of duty on tariff rate. According to the department, the Unit-1 should have paid duty on CAS-4. The appellant immediately paid the differential duty and issued supplementary invoices and Unit-2 availed the cenvat credit on the basis of supplementary invoices. - there is restriction imposed for availing CENVAT credit on the basis of supplementary invoices issued by manufacturer factory from where the goods are sold by, or on behalf of the said manufacturer. In the present case, admittedly, there is no sale of goods but It is inter unit transfer of stock. It is seen that Unit-1 transferred the goods to their Unit-2. I find that this issue is settled by the decision of the Hon ble Andhra Pradesh High Court in the case of Jairaj Ispat (2008 (2) TMI 440 - HIGH COURT OF ANDHRA PRADESH). - Respectfully following the decision of the Hon ble Andhra Pradesh High Court in the case of Jairaj Inspat Limited (supra), I set-aside the impugned orders - Decided in favour of assessee.

Summary

Issues:
Inter-unit transfer of stock, denial of CENVAT credit on the basis of supplementary invoices, violation of Rule 9(1)(b) of the Cenvat Credit Rules, 2004.

Analysis:

Inter-Unit Transfer of Stock:
The case involved M/s. GSP Crop Science Pvt Limited engaged in manufacturing pesticides, with Unit-1 transferring goods to Unit-2 on payment of duty. The Revenue contended that Unit-1 should pay duty based on CAS-4, leading to denial of CENVAT credit to Unit-2. The adjudicating authority upheld the denial, imposing penalties on the appellants. The Commissioner (Appeals) affirmed this decision.

Denial of CENVAT Credit:
The appellants argued that as it was an inter-unit transfer within the same company, allegations of suppression or fraud under Rule 9(1) could not be sustained. They cited various court decisions supporting their position. On the other hand, the Revenue, supported by the Commissioner (Appeals), relied on precedents like the Bosh Chassis Systems case to justify the denial of CENVAT credit based on supplementary invoices.

Violation of Rule 9(1)(b) of Cenvat Credit Rules:
The tribunal, after considering both sides, found that the Preventive Officers observed the goods transfer and duty payment discrepancy between Unit-1 and Unit-2. The appellants argued that even if fraud or suppression was involved, CENVAT credit should still be available based on Rule 9. The tribunal referenced the Andhra Pradesh High Court decision in the Jairaj Ispat case, which supported the appellants' position on stock transfers and CENVAT credit eligibility.

Conclusion:
In line with the Jairaj Ispat case and rejecting the Revenue's arguments, the tribunal set aside the impugned orders, allowing the appeals filed by the appellants with consequential relief. The decision emphasized the distinction between inter-unit stock transfers and sales, highlighting the applicability of CENVAT credit rules in such scenarios.