Cenvat credit taken on the basis of invoice on bona fide belief

PJ/Case Laws/2011-12/1446

Case: UNI DERITEND LTD v/s COMMISSIONER OF C. EX., NAGPUR

Citation: 2011 (272) E.L.T. 280 (Tri. - Mumbai)

Issue:- Cenvat credit taken on the basis of invoice on bona fide belief – allegation of inputs received being different from mentioned in Invoice – action to be taken against supplied as per Circular No. 766/82/2003-CX and not against assessee.

Brief Facts:- A show cause notice was issued to the appellant on the ground that they had played an active role in the fraudulent availment of Cenvat Credit on Excise duty paying documents of Hot Rolled Trimming (HRT) with an intent to evade payment of Excise Duty from PLA Account at the time of clearance of their final products. The HRT were not physically received and used, for its final products but were diverted and sold to various parties in the local market.

The lower Authorities confirmed the demand along with interest and penalty and denied credit availed on inputs. Against this order, appellants are in appeal before the Tribunal.

Appellant’s Contention:- Appellants submitted that they have procured the said input against the duty paid invoice issued by the second stage dealer (M/s. Nagpal Steels) and the same has been cleared after processing on payment of duty. There is no allegation against the appellant that they have not received the goods in their factory and there is no statement of any of the representative of the appellants that they have not received the goods as per description in the invoice.

Appellant also submitted that the allegation made by department that the said goods has not received in the factory of appellant is baseless as they have not physically found in the factory of the appellant that these goods were not used in their manufacturing of their final product. Furthermore before the processing of said goods, appellants carried out the quality test of the input procured by them as per the invoice. It was further submitted that there is no allegation that the appellants had not received the impugned goods against the duty paid invoice and there is also no allegation that they have not discharged their duty liability.

Appellant further submitted that in their own case on identical facts the Tribunal vide Order No. A/1434/C-IV/SMB/2007 dated 11-10-2007 had allowed their appeal. Following the decision of M/s. Rishabh Industries v. Commissioner of Central Excise, New Delhi [2003 (153) E.L.T. 114 (Tri-Del.)] which was confirmed by the High Court [2008 (228) E.L.T. 347 (Del.)] Commissioner of Central Excise, Delhi-II and submitted that as per the CBEC Circular No. 766/82/2003-CX., dated 15-12-2003, the Board had clarified that on the issue of availment of credit by the user manufacturer, it is clarified that action against the consignee to reverse/recover the Cenvat Credit availed of in such cases need not be restored to as long as the bona fide nature of the consignee's transaction is not in dispute. In the case of supplier has received payment from the buyer, (including the amount shown as duty of excise) i.e. the person taking CENVAT Credit has made payment of invoice amount action should also be taken against the supplier under Section 11D and 11DD of the Central Excise Act, 1944. Hence, the demands are not sustainable.

Respondent’s Contention:- Revenue contended that it is a case of M/s. Ispat Industries Ltd (IIL) sold the HRT through auction to M/s. Shree Durga Iron & Steel, who diverted the same to Viramgam without issuing invoices to them and issued invoice to the second stage dealer M/s. Nagpal Steel who availed credit of the Central Excise duty who further issued invoices to the appellant and the appellant has taken the credit for the same without receiving the goods supplied by M/s. IIL which was cleared against payment of duty. These facts have been admitted by both the dealers i.e. first stage dealer and the second stage dealer (supplier to the appellant). In that case, the department has been able to prove that the credit has been taken by the appellants without receiving the goods.

Reasoning of Judgment:- The Tribunal found that in this case it is not disputed that the appellants has not received the inputs against the duty paying document. Only dispute in this case is that the inputs which were received by the appellant are not those inputs which are mentioned in the invoice, this allegation can be verified only by inspection of the input in the factory of the appellants only, which could not be done in this case as the inputs have already gone in the process of manufacturing. Being a prudent buyer the appellant has taken the credit on a duty paying document which is not in dispute and same has been cleared after processing by paying duty on the same at the time of clearance. In that situation, if there is an allegation that the appellant has taken the credit at bona fide belief same is to be dealt with in accordance with the CBEC Circular No. 766/82/2003-CX dated 15-12-2003 wherein it has been clarified that if any action is to be taken, that is to be taken against the supplier of the goods. On the identical facts, the Tribunal has already held that demand is not sustainable in the appellant's own case vide order dt. 11-10-2007, which has been accepted by the department, hence following the judicial discipline, the Tribunal in present proceedings is also of the view that the appellant has taken the credit on the duty paid invoice in accordance with law. Order confirming demand with interest and imposing penalty set aside.

Decision:- Appeal allowed.

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PJ/Case Laws/2011-12/1446

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