CENVAT CREDIT OF EXCESS DUTY PAID BY SUPPLIER IS ADMISSIBLE

[Mr. M. GOVINDARAJAN]

            CENVAT Credit Rules, 2004 allows a manufacturer or a provider of output service to take credit of central excise duty or service tax paid against the payment of excise duty or service tax. The credit is taken as per the invoice available with the manufacturer or a provider of output service. The invoice shall contain all the information as required by CENVAT Credit Rules, 2004.  The question taken for discussion in this article is whether CENVAT credit of excess duty paid by supplier is admissible with decided case laws.

            In 'Commissioner of Central Excise V. MDS Switchgear Limited' - [2008 -TMI - 30952 - SUPREME COURT], the Supreme Court held that the quantum of duty already determined by the jurisdictional Officer of the supplier unit cannot be contested by the Officer-in-charge of recipient unit. When the Department has not challenged the assessment of duty at the supplier's end, it would not be correct to deny CENVAT credit on the basis of invoice issued by the supplier on the ground that the duty paid under that invoice was not payable.

            The answer for the question has been promptly answered by Delhi Tribunal in 'U.P. State Sugar Corporation Ltd., V. Commissioner of Central Excise, Meerut - I' - 2009 -TMI - 35114 - (CESTAT, NEW DELHI). In this case the appellant availed CENVAT credit of Rs.2,655/- on the basis of the invoices issued by M/s Tide Water Oil Company, Ghaziabad.  The said credit has been denied by the Department that this amount is in excess of duty payable on the goods cleared under those invoices on the basis of assessable value shown therein. The adjudicating authority confirmed the demand of CENVAT credit of Rs.1,56,735/- for availing CENVAT credit on welding electrodes and Rs.2655/-.  The Commissioner of Central Excise (Appeals), upheld the Assistant Commissioner's order confirming CENVAT credit of demand of Rs.1,56,735/- and reduced the penalty imposed on the appellant from Rs.3,61,388/- to Rs.30,000/-  Therefore the present appeal lies before the tribunal.

The appellant put for the following submissions before the tribunal:

      >>> So far as the eligibility for welding electrodes used for repair and maintenance of the sugar machinery for CENVAT credit is concerned, the CENVAT credit is available in respect of the same in view of Hon'ble Rajasthan High Court's judgment in the case of 'Hindustan Zinc Ltd., V. Union of India' - [2008 -TMI - 30617 - HIGH COURT RAJASTHAN], wherein the High Court overruled Tribunal Larger bench decision in the case of 'Jaypee Rewa Plant V. Commissioner of Central Excise, Raipur' 2003 -TMI - 48970 - (CEGAT, NORTHERN BENCH, NEW DELHI) and held that CENVAT credit in respect of welding electrodes used for repairs and maintenance of plant and machinery would be available;

      >>> As regards denial of CENVAT credit of Rs.2,655/- the action of the department is incorrect. It is settled law that the assessment cannot be revised at the end receiver of the goods. In this regard, reliance is placed on the tribunal's judgment in the case of 'Ruptex Mineral Water Private Ltd., V. Commissioner of Central Excise, Jaipur' - [2008 -TMI - 30492 - CESTAT NEW DELHI] in which it has been held that the quantum of duty already determined by the Jurisdictional Officer of the supplier unit cannot be contested by the officer in charge of recipient unit.

The Department put for the following contentions:

      >>> As so far as the eligibility of welding electrodes for CENVAT credit is concerned, it is the Hon'ble Supreme Court's judgment in the case of 'Steel Authority of India Limited V. Commissioner' - 2008 (229) ELT A 217 (SC) which is applicable as in this case, the Hon'ble Supreme Court had dismissed the SLP on the basis of the facts of this case, which is clear from the wordings of the order which indicate that the Hon'ble Supreme Court had approved and confirmed the order of the Tribunal;

      >>> In any case, the penalty is imposable on the appellant as in addition to the eligibility of CENVAT credit on various items, one of the allegations against the appellant was that they have cleared inputs in respect of which CENVAT credit had been taken without payment of duty amounting to Rs.55,797/- out of which an amount of Rs.41,717/- had been paid even prior to the issue of show cause notice and this allegation has been upheld. In vies of the removal CENVATed inputs without payment of duty some penalty has to be imposed.  Therefore there is no case for setting aside of penalty.

The appellant argued that the Hon'ble Supreme Court's dismissal of the SLP against the tribunal's order is only a summary dismissal and does not laid down any view of the judgment of the tribunal. The appellant relied on the judgment in the case of 'Assistant Engineer (Civil) V. Commissioner of Central Excise, Rajpur' - 2008 (232) ELT 628 (Tri. LB) wherein the tribunal observed that it is well settled that summary dismissal of SLP/Civil appeal by the Supreme Court does not amount to affirmation of the judgment/order of the Court/Tribunal appealed against, on merit. 

            The Tribunal considered the submissions from both sides.  The Tribunal accepted the contentions of the appellant. It held that the summary dismissal of SLP/Civil Appeal by the Supreme Court does not amount to affirmation of the judgment/order of the Court/Tribunal appealed against, on merit.  It further held that CENVAT Credit in respect of welding electrodes used for repair and maintenance of plant and machinery is admissible to the appellant.

            As regards denial of CENVAT credit of Rs.2,655/- on the basis of invoice issued by registered dealer in the case of Tide Water Oil Company, Ghaziabad, the tribunal held that when the Department has not challenged the assessment of duty at the supplier's end, it would not be correct to deny CENVAT credit on the basis of the invoice issued by the supplier on the ground that the duty paid under that invoice was not payable. In view of this the tribunal held that CENVAT credit of Rs.2,655/- is also admissible to the appellant.