Tribunal grants credit on Sulphur despite Revenue's disallowance, rules in favor of appellant

The Tribunal allowed the appeal, holding that the appellant was entitled to credit on Sulphur received from BPCL despite disallowance by the Revenue. The Tribunal found that since no reasons to apply section 11AC were established, rule 7(b) of Cenvat Rules, which denies supplementary credit, could not be invoked to deny credit. The orders disallowing credit were set aside, and the appellant's eligibility for supplementary credit was upheld.

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Issues involved: Disallowance of credit on Sulphur received from Bharat Petroleum Corporation Limited (BPCL) on nil rate excise duty invoices; Eligibility of supplementary credit under rule 7(b) of Cenvat Rules.

Disallowed Credit Issue: The Revenue disallowed the credit availed by the appellant on Sulphur received from BPCL on invoices showing nil rate of excise duty. Subsequently, duty credit was availed for the period of these invoices based on supplementary invoices issued by BPCL. The appellant produced orders reclassifying sulphur under a different heading issued to BPCL, and a penalty under rule 173Q was imposed on BPCL. However, the Deputy Commissioner found no reasons to invoke section 11AC in the facts of the supplementary demands. The Tribunal held that since no reasons to apply section 11AC were found, the provision of rule 7(b) of Cenvat Rules, which denies supplementary credit, cannot be applied to deny credit to the appellant. The Commissioner's orders were set aside, and the appeal was allowed.

Eligibility of Supplementary Credit Issue: The issue revolved around the eligibility of supplementary credit under rule 7(b) of Cenvat Rules. The Tribunal found that the provision of rule 7(b) denying supplementary credit is similar to section 11AC. As the Deputy Commissioner did not establish reasons to invoke section 11AC in the facts of the supplementary demands, the Tribunal concluded that there was no basis to apply rule 7(b) to deny credit to the appellant. The orders of the Commissioner were set aside, and the appeal was allowed.

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