2022 (9) TMI 796 - AT - Central Excise

CENVAT Credit - duty paying document - entitlement to credit on the basis of supplementary invoices issued by the supplier pursuant to payment of duty that became recoverable on account of non-levy or short levy by reasons of fraud or collusion - Rule 9(1)(b) of the CENVAT Credit Rules, 2004 - HELD THAT - The Revenue does not dispute the legal position that the aforesaid Rule restricting the credit would not apply in case the credit has been availed on goods which are not sold by the supplier manufacturer - It is the case of the Revenue that the assessee and the conversion agents are neither related nor sister unit and there is no stock transfer amongst the aforesaid parties. On perusal of Rule 9(1)(b), it is found that the bar from availing credit on the supplementary invoice is only when the goods are sold to the recipient who has claimed the credit on the basis of supplementary invoices. There is no criterion laid down in the said Rules that the transferring unit should be a sister unit or a related party in order to become eligible for availing credit. The Revenue has not disputed the arrangements between the parties that the converted aluminium ingot has not been sold by the conversion agent to the assessee appellant - the restriction imposed under Rule 9(1)(b) has no application in the present case so as to deny the credit availed by the Appellant on the basis of supplementary invoices issued by the conversion agents in absence of sale of goods by the conversion agents to the assessee appellant herein. The demand cannot be sustained and is hence, set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Disallowance of Cenvat Credit for the period from 2005-06 to 2008-09.
2. Interpretation of Rule 9(1)(b) of the CENVAT Credit Rules, 2004 regarding supplementary invoices.

Analysis:

*Issue 1: Disallowance of Cenvat Credit*
The appellant, engaged in manufacturing excisable goods, provided aluminium waste to conversion agents for processing into aluminium ingots. The conversion agents charged Central Excise Duty on the ingots, which the appellant availed as Cenvat Credit. However, the Central Excise Department alleged undervaluation by the conversion agents, leading to a demand for additional Excise Duty. The dispute arose when the appellant claimed credit for the duty charged on supplementary invoices issued by the conversion agents. The department disallowed the credit, citing Rule 9(1)(b) of the CENVAT Credit Rules, 2004. The Ld. Commissioner (Appeals) upheld the decision, prompting the appellant to appeal.

*Issue 2: Interpretation of Rule 9(1)(b) regarding supplementary invoices*
The crux of the matter revolved around the interpretation of Rule 9(1)(b) concerning the eligibility to claim credit based on supplementary invoices. The appellant argued that the restriction under the rule applies only when goods are sold by the supplier, relying on precedents like the Karnataka High Court decision and Tribunal rulings. The Revenue contended that the restriction applies to transactions akin to stock transfers among sister units, which did not apply in this case. The Tribunal analyzed the rule and past judgments, concluding that the restriction does not apply in scenarios where goods are not sold by the supplier to the recipient claiming credit. As there was no sale of goods from the conversion agents to the appellant, the Tribunal ruled in favor of the appellant, setting aside the demand and allowing the appeal.

In conclusion, the Tribunal's decision favored the appellant, allowing the Cenvat Credit claimed on supplementary invoices issued by the conversion agents. The judgment clarified the interpretation of Rule 9(1)(b) in the context of transactions involving the supply of goods for processing, emphasizing the absence of a sale between the parties as a crucial factor in determining credit eligibility.