Cenvat credit need not be reversed for later cash discount unless refund of excess duty by supplier is proved.

Cenvat credit taken on the duty reflected in a supplier's invoice cannot be reversed merely because the buyer later receives a cash discount reducing the sale price. The operative requirement for reversal arises only where investigation shows that the supplier obtained refund of the excess duty corresponding to that discount. In the absence of any such finding or evidence, the Department cannot sustain a demand for reversal, interest or penalty. The document therefore states that credit remains valid on the invoice duty unless the alleged refund of excess duty is established on facts.

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Issues: Whether Cenvat credit validly taken on the duty shown in the supplier's invoices was required to be reversed merely because the purchaser later received a cash discount reducing the price, in the absence of any finding that the supplier had claimed refund of excess duty.

Analysis: Credit had been availed on the basis of invoices evidencing the duty actually paid by the supplier. A subsequent discount received by the purchaser did not, by itself, authorise the Department to compel reversal of the credit already taken. Reversal could arise only if it was established through investigation that the supplier had obtained refund of the excess duty attributable to the reduced price. As no such investigation or evidence existed in the present case, the demand could not be sustained.

Conclusion: The requirement to reverse Cenvat credit on account of the later discount was not justified on the facts found, and the appeal succeeded in favour of the assessee.

Final Conclusion: The demand, interest and penalty could not stand in the absence of evidence that the supplier had secured refund of excess duty, though the Department was left free to proceed in accordance with law if such facts were established on investigation.

Ratio Decidendi: Cenvat credit taken on the basis of duty shown in the supplier's invoice cannot be reversed merely because the buyer later receives a discount, unless it is shown that the supplier obtained refund of the corresponding excess duty.

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