Supplementary invoices issued on the basis of revised assessable value

PJ/Case Laws/2011-12/1343

Supplementary invoices issued on the basis of revised assessable value - whether cenvat credit deniable

Case: ESSEL PROPACK LTD. & ANR. v/s CCE & C, VAPI, DAMAN

Citation: 2009 (92) RLT 744 (CESTAT-Ahmd.)

Issue:- Supplementary invoices issued on the basis of revised assessable value calculated at higher cost of raw material – whether cenvat credit deniable – when no suppression and credit allowed in case of other assesses?

Brief Facts:- Appellant unit, situated at Wasim was engaged in the manufacture of collapseable tubes and were clearing the same to their sister units located at Silvasa, Goa, Wada (Maharashtra) and Murbad. The assessable value was adopted by the manufacturing unit was on the basis of the cost of production. While arriving at the assessable value, manufacturing unit adopted the cost of raw material of previous year. However, on being pointed out by the audit, they agreed that the cost of raw material stands revised in the present financial year and as such, the higher cost of said material is required to be taken into consideration, thus, resulting in higher assessable value. Accordingly, appellant paid differential duty by adopting higher assessable value and raised separate supplementary invoices in respect of clearances effected to each of their sister concern. On the basis of the said supplementary invoices, their sister concern availed the modvat credit on the differential duty paid by the manufacturing unit.

In earlier case, the Adjudicating Authority allowed taking credit on the basis of supplementary invoices.

In the present case, appellants have been denied modvat credit availed by them on the basis of three supplementary invoices issued by their own sister units located at Wasim (Maharashtra). The Adjudicating Authority confirmed the demand in terms of provisions of Rule 7(1)(b) of the Cenvat Credit Rules, on the ground that there was suppression at the manufacturer end, thus making the supplementary invoices as invalid for the purpose of availment of credit. The said order of the Adjudicating Authority was confirmed in appeal by the Commissioner (Appeals). Hence the appeal is filed before the Tribunal.

Appellant’s Contention:- Appellant submits that proceedings for denial of such credit were initiated against their entire sister concerns located at Goa and Wada. However, such proceedings were dropped by the Original Adjudicating Authority on the ground that there was no suppression at the end of the manufacturing unit and the supplementary invoices were valid documents for the purpose of availment of credit. No appeal was filed by Revenue against such order.

Appellant submits that the same identical supplementary invoices raised by manufacturer were accepted by Revenue in other two matters of their sister concern, the present impugned order cannot be sustained on this short ground itself.

Appellant submits that there is no suppression at the manufacturers end, inasmuch as the assessable value was being adopted by them on the legal understanding and with the knowledge of the jurisdictional Central Excise Authorities. It was on bonafide belief of adoption of different cost of raw material and as soon as the same was pointed out by the audit, the appellants have raised supplementary invoices and paid the differential duty. The Revenue, till date have not initiated any proceedings against the manufacturing unit alleging any suppression etc. on their part or inviting any penal action. In this scenario, denial of credit to the appellant on the said ground, is not justified. It was further submitted that in any case, it is Revenue neutral exercise and the credit should not be denied to the appellant.

Respondent’s Contention:- Respondent submits that the very fact of wrong adoption of assessable value itself is indicative of malafide intention on the part of manufacturing unit. The said under valuation was pointed out by the audit and it is not a case of suo-moto revision of assessable value.

Reasoning of Judgment:- The Tribunal found that the duty paid by the manufacturing unit was admittedly available as credit to its sister unit to whom the goods were being cleared. In this scenario, there could be no motive on the part of manufacturing unit to under value the goods and to pay less duty. Further, it was also noted that identical proceedings in respect of other sister concerned had been dropped and accepted by the Revenue, the present proceedings arising out of same set of circumstances, should not be ordinarily upheld. The Tribunal were also informed at this stage, that present appellant was in a position to utilize excess credit availed by them inasmuch as they were paying the duty out of PLA during the relevant period. The fact of non-initiating the proceedings against the manufacturing unit also supports the appellants case that the Revenue never alleged any suppression on manufacturing unit. As such, the supplementary invoices which were issued by the manufacturing unit cannot be held to be result of any suppression on the part of manufacturing unit, so as to make the appellant disentitled to the credit of the duty paid on the said invoices.

Decision:- Appeal allowed.

Comment:- The credit is rightly allowed on supplementary invoice. When there is allegation of willful suppression in show cause notice itself then the credit on supplementary invoice cannot be disallowed on the allegation of willful suppression.

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PJ/Case Laws/2011-12/1343

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