Supplementary invoice credit allowed where Section 11AC penalty was unavailable for absence of suppression of facts.

Cenvat credit on supplementary invoices could not be denied merely because the supplier was penalised, where the supplier's own duty demand order recorded that Section 11AC was inapplicable for lack of suppression of facts. The restriction on supplementary credit under Rule 7(b) was treated as pari materia with Section 11AC, so the absence of the statutory ingredients for that penalty meant the credit could not be disallowed in the recipient's hands. The assessee was therefore entitled to the credit.

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Issues: Whether credit could be denied on supplementary invoices merely because the supplier had been penalised, when the supplier's duty demand proceedings recorded that Section 11AC could not be invoked for want of suppression of facts.

Analysis: The credit had been taken on the basis of supplementary invoices issued after duty was paid by the supplier. The denial was founded on the supplier's penalty under Rule 173Q of the Central Excise Rules, 1944, and on the restrictive effect of Rule 7(b) of the Cenvat Rules. The deciding factor was that the supplier's own duty demand order expressly stated that penalty under Section 11AC could not be invoked because there was no suppression of facts. Since the bar against supplementary credit under Rule 7(b) was treated as pari materia to Section 11AC, the absence of the ingredients required for Section 11AC meant that the credit could not be disallowed in the appellant's hands.

Conclusion: Credit could not be denied on the supplementary invoices, and the assessee was entitled to the credit.

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