2008 (6) TMI 133 - AT - Central Excise

Denial of Cenvat credit - imposition of equal amount of penalty According to the Department, the price of the goods was subsequently reduced by the supplier and, to the extent it was reduced, Cenvat credit was not admissible to the buyer held that credit taken on strength of the invoice covering purchase of inputs, cannot be subsequently reduced on the above ground appeal of assessee is allowed

Summary

Issues:
Denial of Cenvat credit for the period 2002-03 to 2006-07 and imposition of penalty.

Analysis:
The appeal in this case was against the denial of Cenvat credit amounting to Rs. 84,47,329/- for the period 2002-03 to 2006-07, including Education Cess and Higher Education Cess, as well as against the imposition of an equal amount of penalty. The Department contended that the Cenvat credit was not admissible to the buyer (manufacturer of final products) as the price of the goods was subsequently reduced by the supplier. However, the appellants argued that a manufacturer of final products is entitled to Modvat/Cenvat credit of the duty paid on inputs by the manufacturer/dealer of inputs as evidenced by the relevant statutory invoices. They relied on various decisions to support their plea.

The Tribunal carefully considered the submissions from both sides. It was noted that the circular and judgment cited by the Department were not relevant to the issue at hand, as they pertained to the valuation of excisable goods, not the admissibility of Cenvat credit. The Tribunal reiterated the settled law that Modvat/Cenvat credit of the duty paid by the input manufacturer/supplier, as evidenced by relevant invoices, is admissible to a manufacturer of the final product. This principle was supported by the decisions cited by the appellants' counsel. Therefore, the Tribunal set aside the impugned order, allowed the appeal, and disposed of the application.

In conclusion, the Tribunal held that the Cenvat credit taken by the appellants based on relevant invoices covering the purchase of inputs cannot be subsequently reduced due to a price reduction by the input supplier. The Tribunal's decision was based on the established legal principle that Modvat/Cenvat credit is admissible to the manufacturer of the final product, as supported by relevant case law.