Admissibility of Cenvat Credit when price reduced subsequently

PJ/Case Laws/2012-13/1080

Case: ADVANCE DETERGENTS LTD V/S COMMISSIONER OF CENTRAL EXCISE, PONDICHERRY

Citation: 2008 (232) ELT 90 (TRI-CHENNAI)

Issue:- Admissibility of Cenvat credit taken on the strength of relevant invoice covering purchase of inputs when subsequently price of inputs was reduced by input-supplier.

Brief Facts:- Credit of an amount of Rs. 84,47,329/- for the period 2002-03 to 2006-07 was taken of the duty paid on inputs received under cover of invoices from the input suppliers. Cenvat credit was denied to the appellants on the ground that the price goods was reduced subsequently. Penalties were also imposed.

Appellant is in appeal against the same.

Appellant’s Contention:- Appellants contended that it is settled law that a manufacturer of final products is entitled to Modvat/Cenvat credit of the duty paid on inputs by the manufacturer/dealer of inputs as evidenced by the relevant statutory invoices. In support of this plea, they relied on the following decisions:-

(i) Creative Polypack Ltd. v. Commissioner of Central Excise, Kolkata-II [2007 (217) E.L.T. 148 (Tri.-Kolkata)].

(ii) Parasrampuria Synthetics Ltd. v. Commissioner of Central Excise, Jaipur [2005 (191) E.L.T. 899 (Tri.-Del.)].

(iii) Nahar Industrial Enterprises Ltd. v. Commissioner of Central Excise, Chandigarh [2007 (210) E.L.T. 38 (Tri.-Del.) = 2007 (5) S.T.R. 385 (T)].

(iv) Kedia Electricals Ltd. v. Commissioner of Central Excise, Hyderabad [2006 (206) E.L.T. 852 (Tri.-Bang.)].

(v) Commissioner of Central Excise, Jallandhar v. Aggarwal Iron Industries [2005 (184) E.L.T. 397 (Tri.-Del.)].

(vi) SPIC (HCD) Ltd. v. Commissioner of Central Excise, Chennai-I [2006 (201) E.L.T. 386 (Tri.-Chennai) = 2007 (6) S.T.R. 275 (Tri.-Mumbai)].

(vii) Brown Kraft Inds. Ltd. v. Commissioner of Central Excise, Thane-II [2007 (212) E.L.T. 369 (Tri.-Mumbai) = 2007 (6) S.T.R. 275 (Tri.-Mumabi)].

Respondent’s Contention:- Department contended that the price of the goods was subsequently reduced by the supplier and, to the extent it was reduced, Cenvat credit was not admissible to the buyer (manufacturer of final products). Reference was made to Board Circular pertaining to valuation of excisable goods under the amended provisions of law. Reference was made to judgment of the Supreme Court in the case of Maruti Udyog Ltd. [2002 (141) E.L.T. 3 (S.C.)] wherein the admissibility of abatement of duty from invoice price of excisable goods under Section 4(4)(d)(ii) of the Central Excise Act, to the manufacturer of such goods was examined.

Reasoning of Judgment:- The Tribunal held that the judgment and the circular relied upon by the Revenue were not relevant as they related to valuation of goods.

The Tribunal held that it is well settled law that Modvat/Cenvat credit of duty paid by the input-manufacturer/supplier, evidenced by the relevant invoices, is admissible to a manufacturer of final product. This is the view stated and restated through the decisions cited by the Appellant. Impugned orders set aside.

Decision:- Appeal allowed.

Comment:- This decision also underlines the principle that the duty paid at supplier end cannot be varied at buyer’s end. Even though the price has been reduced but there is no refund of duty to supplier, hence the duty cannot be varied and the credit is admissible to buyer of goods.

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PJ/Case Laws/2012-13/1080

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