2016 (6) TMI 1360 - AT - Central Excise

CENVAT Credit - duty paying documents - credit disallowed on the ground that certain debit notes were issued by the appellant - HELD THAT - There is no material on record to show that through the modus operandi of issuance of the debit note, the appellant had enabled the supplier to take refund of the duty element if any. The appellant when explains that the debit notes do not relate to duty element and the Cenvat credit was availed on input and input service used in the manufacture, in absence of evidence to the contrary, the adjudication fails - Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues: Disallowance of Cenvat credit due to issuance of debit notes, impact on duty element, eligibility of Cenvat credit, effect on Revenue interest.

1. Disallowance of Cenvat Credit due to Issuance of Debit Notes:
The appellant's Cenvat credit of &8377; 74,746/- was disallowed based on the issuance of certain debit notes. However, the show cause notice did not specify if these debit notes affected the duty element paid by the appellant to the seller. The absence of evidence or allegation regarding a mutual understanding to refund duty via debit notes led to the conclusion that disallowing the Cenvat credit was unwarranted. Revenue did not challenge the eligibility of the Cenvat credit, further strengthening the appellant's case.

2. Impact on Duty Element and Revenue Interest:
The Revenue contended that the issuance of debit notes impacted its interest whenever they were issued. However, the Tribunal found no material evidence indicating that the appellant's issuance of debit notes enabled the supplier to claim a refund of the duty element. The appellant clarified that the debit notes were unrelated to the duty element and that the availed Cenvat credit pertained to inputs and input services used in manufacturing. In the absence of contradictory evidence, the adjudication failed, leading to the allowance of the appeal.

In conclusion, the judgment by the Appellate Tribunal CESTAT Chennai highlighted the importance of establishing a direct link between the issuance of debit notes and the impact on duty elements to justify the disallowance of Cenvat credit. Lack of evidence supporting Revenue's claims and the appellant's explanation regarding the nature of debit notes and the availed credit played a crucial role in the Tribunal's decision to allow the appeal. The judgment emphasized the necessity of concrete evidence and allegations to substantiate claims related to Cenvat credit disallowance, ultimately ruling in favor of the appellant.