It is now settled legal position that credit cannot be denied to the recipient when duty amount was legally not payable or that duty was paid at a higher rate or value. The Hon’ble Punjab and Haryana High Court in the case of CCE, Chandigarh vs. Ranbaxy Labs Ltd 2006 (203) ELT 213 (P&H) held that even if duty was legally not payable, credit cannot be denied to the recipient of goods when admittedly duty has been collected by the Revenue.
Further in the entire proceedings against the appellant for denial of credit, there is no allegation or finding that the appellant has intentionally availed irregular credit with ulterior motive or that the credit has been availed wrongly in collusion with the supplier. In absence thereof, denial of credit would be harsh and highly unwarranted.
In view of the above discussions, I am of the considered view that credit is legally eligible and therefore the impugned demand is set aside.
FULL TEXT OF THE CESTAT JUDGEMENT
The present appeal has been filed by the assessee, M/s. Jai Balaji Industries Limited, against Order-in-Appeal dated 28.03.2018 passed by the Ld. Commissioner (Appeals), Siliguri, whereby he has upheld the demand of central excise duty of Rs.18,203/- alongwith interest and penalty confirmed by the Ld. Assistant Commissioner, Central Excise, Durgapur, vide Order-in-Original dated 24.03.2017 consequent to denial of Cenvat credit on inputs for the period 2011-12 to 2015-16.
2. Briefly stated the facts of the case are that the appellant is engaged in the manufacture of M. S. Ingots and M. S. Billets on which central excise duty is being paid. The appellant procured parts of induction furnace on payment of central excise duty on which credit was availed. This has been disputed by the department. It is the case of the department that the goods on which credit has been availed, was supplied by one, M/s. Inductotherm (I) Pvt Ltd, Ahmedabad (‘supplier’), which was cleared ‘as such’ at a value higher than the value at which the said goods were procured by the supplier. It was also contended that the said goods were not manufactured by the supplier but were cleared ‘as such’. Show Cause Notice dated 25.05.2016 was issued and the duty demand was confirmed vide Order-in-Original dated 24.03.2017, which has further been upheld by the Ld. Commissioner (Appeals). Hence the present appeal before the Tribunal.
3. Shri S. Mohapatra, GM (Taxation) appeared for the appellant and Shri S. S. Chattopadhyay, Supdt, (AR) appeared for the Respondent.
4. The Learned General Manager (Taxation) appearing on behalf of the appellant company submitted that the fact that goods have been received in the factory which has been used in the manufacture of final product by the appellant is not in dispute. He further submitted that the credit has been availed on the strength of valid central excise invoice issued by the supplier, which is duly registered with the jurisdictional central excise authorities and that the appellant has borne the duty amount at the time of procurement of said goods. Even if the said goods have not been manufactured by the supplier or that duty has been paid on a higher assessable value, will not preclude the appellant, which has availed the credit with the bonafide belief that credit is legally permissible. He also submitted that it is beyond the control of the appellant to ascertain whether the assessable value has been correctly considered for payment of duty by the supplier.
5. On the contrary, the Ld. Departmental Representative while supporting the impugned order passed by the Ld. Commissioner (Appeals), relied on the decision of the Hon’ble Gujarat High Court in the case of CCE, Ahmedabad vs. Inductrotherm (I) Pvt Ltd 2012 (283) ELT 359 (Guj) wherein it has been held that the assessee clearing the goods ‘as such’ could not change the value while clearing the bought out goods, even though the assessee has paid the duty by way of debiting the CENVAT credit account and therefore, the assessee is required to deposit the said duty amount under Section 11D of the Central Excise Act. He submitted that since the amount that has been paid for the goods is not a duty, the appellant cannot avail CENVAT On the said premise, the Ld. DR prayed that the appeal filed by the assessee be rejected being devoid of merit.
6. Heard both sides and perused the appeal records.
7. In the instant case, I find that credit has been denied for the reason that the subject goods on which credit has been availed by the assessee has not been manufactured by the supplier but has been cleared ‘as such’ to the appellant herein.
I find that as per Rule 3(5) of the CENVAT Credit Rules, 2004, which deals with the bought out goods, states that when inputs or capital goods are removed ‘as such’ from the factory of the manufacturer, the manufacturer shall pay an amount equal to the credit availed in respect of such input or capital goods and such removal shall be made under the cover of central excise invoice in the manner prescribed in Rule 9 of the said Credit Rules. Further, as per Rule 3(6) of the Credit Rules, the amount paid under aforesaid Rule 3(5) shall be eligible as CENVAT credit as if it was a duty paid by the person who removed such goods. Therefore, in view of the specific provisions contained in Rule 3(5) and 3(6) aforesaid, the appellant company receiving input from the supplier who has removed the said goods ‘as such’ (being bought out goods) is legally entitled to credit even if the said goods have not been manufactured by the supplier. Therefore, in the instant case, I am of the considered view that the appellant is legally entitled to avail credit on inputs which though not manufactured by the supplier, has been removed by the supplier on the strength of duty paid excise invoice particularly in the fact of the case that goods have been physically received by the appellant for use in manufacture.
Now in so far as the dispute regarding payment of amount ‘as duty’ higher that the amount payable, I am of the view that the issue is no longer res- integra inasmuch it is now settled legal position that credit cannot be denied to the recipient when duty amount was legally not payable or that duty was paid at a higher rate or value. The Hon’ble Punjab and Haryana High Court in the case of CCE, Chandigarh vs. Ranbaxy Labs Ltd 2006 (203) ELT 213 (P&H) held that even if duty was legally not payable, credit cannot be denied to the recipient of goods when admittedly duty has been collected by the Revenue. The relevant portion of the decision is extracted below:
“3. Brief facts of the case are that the assessee sent certain goods for job work. As per notification, the job worker was exempted from payment of duty. However, still he paid the duty and the assessee had availed Modvat credit thereof on account of payment of such duty by the job worker, claim of which was disallowed by the Commissioner which order was reversed by the Tribunal. It is not disputed that duty, the Modvat credit of which was availed of by the respondent was paid by the job worker even though not required to pay. The respondent has taken the credit of duty, which was actually paid. We do not dilate much on the issue as this court has earlier dismissed an appeal filed by the revenue raising the similar question of law in C. E.A No. 51 of 2005 titled as Commissioner, Central Excise Commissionerate, Chandigarh v. M/s Punjab Anand Lamp Industries Ltd., Mohali, decided on 4-7-2006.”
Further in the case of V G Steel Industry vs. CCE 2011 (271) ELT 508 (P&H), while setting aside the decision of Tribunal which took a contrary view, the High Court observed that :-
“2. The assessee claimed cenvat credit to the extent of duty paid on purchase of inputs. The same was disallowed on the ground that duty paid on purchase of inputs was in excess of duty due and the benefit could be admissible only to the extent of duty due. The order of Adjudicating Authority has been affirmed by the Commissioner (Appeals) as well as by the Tribunal. The Tribunal observed as under :-
‘4. The law on the point that the manufacturer can avail the Modvat Credit only to the extent of the duty paid on the inputs purchased is well settled. In the absence of the inputs being subjected to duty payment question of availing modvat credit by the manufacturer procuring such inputs does not arise, once the authorities had held that the supplier of the inputs was not subjected to the duty payment, question of appellants seeking to avail modvat credit in respect of inputs so supplied by the supplier cannot arise.
5. In case the supplier had paid the duty wrongly or by mistake, that would only entitle the supplier to seek refund of such amount. But that by itself cannot create any right in favour of the appellants who had procured such duty free inputs. The contentions canvassed as above, on behalf of the respondents are well found and, therefore, we do not find any fault in the impugned order. Therefore, the appeal is liable to be dismissed and is accordingly, dismissed.”
3. We have heard learned counsel for the parties.
4. Learned counsel for the appellant submits that even if the duty has been paid in excess of the amount finally held to be payable, unless the excess duty paid has been refunded, the assessee could claim cenvat credit as the department could not get the duty twice. Reliance has been placed on order of this Court dated 22-7-2010 in CEA No.42 of 2010 Commissioner Central Excise, Chandigarh v. M/s. Guwahati Carbons Ltd. wherein after referring to earlier judgments of this Court in CCE v. Ranbaxy Labs Ltd., 2006 (203) E.L.T. 213 and CCE v. Swaraj Automotives Ltd., 2002 (139) E.L.T. 504 and judgment of Madras High Court in CCE v. CEGAT, Chennai, 2006 (202) E. L. T. 753 the plea of the assessee was upheld. Learned counsel for the respondent is unable to distinguish the applicability of the judgment relied upon on behalf of the appellant.
8. In view of above, we answer the questions raised in favour of the assessee. The appeal is allowed.”
8. In view of the above legal position, credit cannot be denied in the hands of the recipient even if the duty was legally not payable by the supplier or that higher amount of duty has been paid by the supplier against whom the department has initiated proceedings.
9. I also note that in the entire proceedings against the appellant for denial of credit, there is no allegation or finding that the appellant has intentionally availed irregular credit with ulterior motive or that the credit has been availed wrongly in collusion with the supplier. In absence thereof, denial of credit would be harsh and highly unwarranted. In view of the above discussions, I am of the considered view that credit is legally eligible and therefore the impugned demand is set aside.
10. The appeal is thus allowed with consequential relief.