2023 (5) TMI 77 - AT - Central Excise

CENVAT Credit - Invalidation of advance authorization - applicability of N/N. 44/2001-CE (NT) dated 26.06.2001 under which the supplier was not supposed to pay any excise duty - supplies made without availing exemption on payment of duty, on such duty Cenvat credit is not admissible - denial of credit only on the ground that supplier was supposed to avail exemption Notification No. 44/2001-CE (NT) dated 26.06.2001 and since the supplier has not availed exemption, duty paid on the said goods shall not available Cenvat credit to the appellant as recipient of the goods - HELD THAT - The Notification No. 44/2001-CE (NT) is indisputably a conditional one. In terms of Section 5A of Central Excise Act, 1944 it is not compulsion for the assessee to avail a conditional notification - From the plain reading of Section 5A, sub section (1A) it is clear that only compulsion on the assessee is to avail exemption which is absolute and the said compulsion is not applicable in respect of conditional notification. In the present case, Notification No. 44/2001-CE (NT) being a conditional one, it is optional for the assessee to either avail the said conditional notification or not. Therefore, when the supplier has not availed exemption notification 44/2001-CE (NT) and cleared the goods on payment of duty, such payment of duty cannot be disputed. Consequently, appellant s availment of Cenvat credit of such duty cannot be questioned. Moreover, irrespective of the fact that whether at the supplier s end duty is payable or otherwise, if the duty has been paid on the goods at the recipient end, for the purpose of availment of Cenvat credit, no question can be raised. As per Cenvat Credit Rules, there is no bar for the input received by an assessee that such input is otherwise dutiable or not for availing Cenvat credit. The only condition attached to the Rules is that the input received by the assessee shall be duty paid. Therefore, for this reason also Cenvat credit at the appellant s end cannot be denied. On the issue that whether the payment of duty can be disputed while allowing Cenvat credit at the recipient end of the inputs, in the case of Pearl Polymers Limited 2016 (12) TMI 337 - CESTAT CHANDIGARH , the Tribunal has held that the payment of duty under Serial No. 3 of Notification 23/2003 is not disputed by the parties. The duty cast on the appellant is to verify that the 100% EOU has paid duty under Sr. No. 3 of the said notification when the duty has been paid under Sr. No. 3 of Notification 23/2003-C.E., the same is sufficient to entitlement to the credit to the appellant. In that circumstance, I hold that the appellant has correctly availed the Cenvat credit. On both the counts i.e. on the issue of availment of exemption Notification No. 44/2001-CE (NT) dated 26.06.2001 by the supplier and also where even if the duty is not payable by the supplier but the same was paid, Cenvat credit cannot be denied at the recipient end - Appeal allowed.

Summary

Issues Involved:
1. Whether the appellant is entitled to Cenvat credit on duty paid by the supplier despite the availability of an exemption under Notification No. 44/2001-CE (NT).
2. Whether the duty paid by the supplier can be disputed at the recipient's end for the purpose of availing Cenvat credit.

Summary:

Issue 1: Entitlement to Cenvat Credit Despite Exemption Notification
The department denied the appellant Cenvat credit on the grounds that the supplier should have availed the exemption under Notification No. 44/2001-CE (NT) dated 26.06.2001, which mandates duty-free supplies. The appellant argued that the notification is conditional and optional, and the supplier chose to pay the duty, making the appellant entitled to the Cenvat credit. The Tribunal agreed, stating that Section 5A of the Central Excise Act, 1944, does not compel the assessee to avail a conditional notification. Therefore, the supplier's choice to pay duty cannot be disputed, and the appellant's availment of Cenvat credit is valid.

Issue 2: Disputing Duty Payment at Recipient's End
The Tribunal held that the duty paid by the supplier cannot be questioned at the recipient's end for the purpose of availing Cenvat credit. The Cenvat Credit Rules do not bar the recipient from availing credit on duty-paid inputs, regardless of whether the duty was payable. The Tribunal cited several judgments, including Oleofine Organics (India) Pvt. Limited and Balakrishna Industries Limited, reinforcing that the recipient is entitled to Cenvat credit if the inputs are duty paid.

Conclusion:
The Tribunal set aside the department's order, allowing the appellant to avail Cenvat credit on the duty paid by the supplier. The Tribunal emphasized that the payment of duty by the supplier, even if not mandatory, cannot be disputed at the recipient's end for the purpose of denying Cenvat credit. The appeals were allowed with consequential relief.