2025 (1) TMI 304 - AT - Central Excise

CENVAT Credit - duty paying documents - whether the availment of Cenvat Credit by the appellant on the supplementary invoice in respect of the duty paid on the stock transfer can be denied invoking Rule 9(1)(b) of Cenvat Credit Rules, 2004? - suppression of facts or not - HELD THAT - From the plain reading of the above Rule 9(1)(b) it is clear that the restriction for Cenvat Credit provided in the Rule 9(1)(b) is applicable only in such cases where the transaction of input is of sale. In the present case admittedly the good were received by the appellant from their own unit therefore the transaction is not for sale but only stock transfer. It is also observed from the invoice copy that invoices for stock transfer and no VAT tax has been paid therefore in the present case transaction being of stock transfer and not of sale, Rule 9(1)(b) is not applicable and on that basis denial of Cenvat Credit is without authority of law. Similar issue has considered by this tribunal in the case of M/S ESSAR OIL LTD. VERSUS CCE RAJKOT 2014 (2) TMI 766 - CESTAT AHMEDABAD wherein it was held that 'The word Challan and any other similar document evidencing payment of additional CVD, mentioned in Explanation to Rule 9 (1)(B), will thus mean those situations where duty is paid under a challan by an importer/dealer of imported goods who has sold the cenvatable goods.' Conclusion - In the present case transaction being of stock transfer and not of sale, Rule 9(1)(b) is not applicable and on that basis denial of Cenvat Credit is without authority of law. Appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The primary legal issue in this case is whether the appellant is entitled to avail Cenvat Credit on a supplementary invoice for duty paid on stock transfers, given the restrictions under Rule 9(1)(b) of the Cenvat Credit Rules, 2004. The specific questions include:

Whether Rule 9(1)(b) applies to transactions that are not sales but stock transfers.
Whether the prohibition under Rule 9(1)(b) is applicable when the duty is paid due to suppression of facts or fraud.
Whether the denial of Cenvat Credit is justified when no sale transaction is involved.
Whether the extended period of limitation under Section 11A(1) of the Central Excise Act, 1944, is applicable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Applicability of Rule 9(1)(b) to Stock Transfers

Legal Framework and Precedents: Rule 9(1)(b) of the Cenvat Credit Rules, 2004, restricts Cenvat Credit on supplementary invoices if the additional duty was due to fraud or suppression of facts. However, it applies to transactions involving sales.
Court's Interpretation and Reasoning: The court noted that Rule 9(1)(b) applies only to sales transactions. In this case, the goods were transferred between units of the same company, not sold.
Key Evidence and Findings: The invoices were for stock transfers, and no VAT was paid, indicating no sale occurred.
Application of Law to Facts: Since the transaction was a stock transfer, Rule 9(1)(b) does not apply, and the denial of Cenvat Credit is without legal basis.
Treatment of Competing Arguments: The department argued that the rule applied due to the nature of the duty payment (fraud/suppression). However, the court found this irrelevant to non-sale transactions.
Conclusions: The court concluded that Rule 9(1)(b) is not applicable to stock transfers, and Cenvat Credit cannot be denied on this basis.

Issue 2: Extended Period of Limitation under Section 11A(1)

Legal Framework and Precedents: Section 11A(1) allows for an extended limitation period in cases of fraud, suppression, or willful misstatement.
Court's Interpretation and Reasoning: The court examined whether the elements of fraud or suppression justified the extended period.
Key Evidence and Findings: The department found discrepancies in the valuation and duty payment, which the appellant did not disclose.
Application of Law to Facts: The court found that the appellant was aware of the valuation issues and failed to inform the department, justifying the extended period.
Treatment of Competing Arguments: The appellant argued that there was no intention to evade duty since the duty paid was available as credit to another unit. The court found this insufficient to negate the suppression of facts.
Conclusions: The court upheld the use of the extended period of limitation, finding it applicable due to the appellant's suppression of facts.

3. SIGNIFICANT HOLDINGS

The court held that "the restriction for Cenvat Credit provided in Rule 9(1)(b) is applicable only in such cases where the transaction of input is of sale."
The court established that in cases of stock transfers, Rule 9(1)(b) does not apply, and Cenvat Credit cannot be denied on this basis.
The court affirmed that the extended period of limitation under Section 11A(1) is applicable when there is suppression of facts, even if the duty paid is available as credit to another unit.
The appeal was allowed, and the denial of Cenvat Credit was set aside.

The judgment clarifies the application of Rule 9(1)(b) concerning stock transfers and the conditions under which the extended period of limitation can be invoked. It emphasizes the distinction between sale transactions and stock transfers in the context of Cenvat Credit eligibility.

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