Reduction in Price of Inputs later on after clearance - whether Cenvat Credit to be reversed to that extent?

PJ/Case Laws/2012-13/1103

Case: KEDIA ELECTRICALS LTD. V/S. COMMISSIONER OF CENTRAL EXCISE, HYDERABAD

Citation: 2008 (11) STR 197 (Tri-Bang)

Issue:- Cenvat - Reversal of - Reduction in price of inputs subsequently - Discount received by input purchaser at a later stage - Appellants availed Cenvat credit on the basis of invoices.

Brief Facts:- Appellants procured certain inputs from M/s. Sterlite Industries (I) Ltd (‘SIL’) under invoices on payment of duty. During the period from 11/2002 to 12/2003, appellants availed Cenvat Credit of duty paid by SIL as per Rule 3 of Cenvat Credit Rules 2001 and 2002. After about a month or so, the appellants received cash discount in respect of which each invoice raised by SIL which effectively reduced the invoice price. However, the appellants had not reversed the proportionate Cenvat credit which it had availed immediately on receipt of invoices. Therefore the Revenue proceeded against the appellants.

The Assistant Commissioner confirmed the demand of Rs. 36,234/- with interest and imposed equal penalty under Section 11AC of Central Excise Act, 1944.

In appeal, the appellants argued before the Commissioner (Appeals) that they had taken credit only on the basis of the duty indicated in the invoices and there is no provision wherein the appellants has to reverse the credit on any discount even when the main company did not claim any refund on such discount granted. The Commissioner (Appeals) held that confirming the demand without verifying full facts is neither proper nor justifiable. Therefore he remanded the case.

Appellants being aggrieved over the decision of the Commissioner (Appeals) filed appeal before the Tribunal.

Appellant’s Contention:- Appellants pointed out that in the impugned order, the Commissioner (A0 has relied on decision of the Tribunal in the case of CCE, Surat v. Trinetra Texturisers Pvt. Ltd. [2004 (166) E.L.T. 384 (Tri.-Mumbai)] and in the case of Kerala State Electronic Corpn. v. CCE, Kochi [1996 (84) E.L.T. 44 (Tribunal)] wherein it was held that the Central Excise authorities in charge of factories receiving inputs have no jurisdiction to re-assess the duty on inputs received.

Respondent’s Contention: - Revenue fairly conceded that there is no evidence to show that the supplier of inputs claimed refund of excess duty paid on account of reduction in prices due to give discount to the appellants.

Reasoning of Judgment:- The Tribunal noted that from records it is clear that appellants availed Cenvat credit only on the basis of invoice which indicated the actual duty paid by the suppliers. If at a later stage the appellants received certain discounts, the Department cannot compel them to reverse the credit on account of the reduction in price. If on investigation it is found that the supplier of inputs had obtained refund then it is open to the department to take action against the appellants for reversal of the excess credit taken. But in the present case, no such exercise has been done. Therefore, no action can be taken against the appellants in the absence of any investigation.

However the Tribunal stated that the department is free to initiate any action against the appellants on the basis of investigation which may be conducted at the suppliers end, in accordance with law.

Decision:- Appeal allowed with consequential relief.

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PJ/Case Laws/2012-13/1103

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