Excess duty paid - Denial of cenvat credit to buyer

PJ/Case laws/2012-13/1060

Excess duty paid - Denial of cenvat credit to buyer - justification of

Case: NAHAR INDUSTRIAL ENTERPRISES LTD. V/S CCE, CHANDIGARH

Citation: 2007(5) S.T.R. 385 (Tri-Del)

Issue: - Cenvat Credit – Excess duty paid by Supplier-credit cannot be denied at buyer’s end.

Brief Fact: -Appellant was denied the benefit of Cenvat credit on the ground that supplier of inputs are liable to pay duty at the time of clearance of input at the rate of 8% whereas supplier has paid duty at the rate of 9.2% and the appellant availed credit on duty paid by the supplier.

Order was passed denying taking of excess credit of duty taken. And the Commissioner (Appeals) has also upheld the order in original.

Appellant filed this appeal against the order-in-appeal before the Tribunal.

Appellant’s Contention: - Appellant contended that Revenue has not objected to payment of higher duty by their manufacturer and supplier of the inputs. That Revenue has accepted 9.2% duty in respect of the inputs received by them. Therefore, at the time of taking credit, the quantum of duty cannot be reduced on the ground that supplier of inputs are required to pay less duty. Appellant relied upon the decisions of the Tribunal in the case of Jayaswals Neco Ltd. v. CCE, Raipur [2005 (191) ELT 519] and in the case of Parasrampuria Synthetics Ltd. v. CCE, Jaipur [2005 (191) ELT 899]. That the Tribunal has held that Cenvat credit taken on the basis of specified duty paid by the manufacturer cannot be denied on the ground that supplier of inputs paid higher duty.

Respondent’s Contention: - Revenue contended that as the goods are liable to pay duty at the rate of 8% and the manufacturer has paid duty in excess just to pass on the higher amount of credit, therefore, appellants are not entitled for the excess credit.

Reasoning of Judgment: - The Tribunal noted that Revenue is not disputing the fact that they had not raised any objection when the goods are cleared on payment of duty at the rate of 9.2% by the supplier. Revenue has accepted the duty without any objection. The appellants are taking credit of the duty paid by supplier of goods. The Tribunal in the decisions relied upon by appellant specifically held that when revenue is not disputing the payment of duty at the ends of manufacturer; the objection cannot be raised while taking credit of duty by the manufacturer who is using these goods as inputs in the manufacture of dutiable goods.

It was held that in the present case as Revenue is not objecting to payment of duty at the rate of 9.2% at the time of clearance of goods, therefore, in view of the above decisions of the Tribunal, the credit cannot be restricted to 8% at the end of the appellant who are recipient of inputs. Impugned order set aside.

Decision: - Appeal allowed.

Comment:- This principle is well established now and even the Apex Court decisions support the same. But we have seen that the audit parties normally raise this objection that the excess duty paid by supplier is not eligible as credit to buyer. This is also approved by Commissioner and show cause notice is also issued. Even the first adjudication officer gives the verdict in favour of revenue and it is settled at tribunal only. But litigation has its cost and poor manufacturer has to bear the same. Unless and until there is positive attitude at grass root level then the litigation cannot be avoided even on settled issues.

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PJ/Case laws/2012-13/1060

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