Cenvat credit on supplementary invoices is barred where differential duty follows departmental detection of undervaluation and evasion.

Supplementary invoices do not support Cenvat credit where the additional duty arises from undervaluation detected by the department and the differential duty is paid only after detection. Rule 7(1)(b) of the Cenvat Credit Rules permits such invoices for additional duty paid after clearance, but not where the demand results from non-levy or short-levy linked to fraud, suppression of facts, or contravention with intent to evade duty. On the facts noted, the supplier had undervalued the goods and the findings were unrebutted, so the invoices were not valid credit documents and the allowance of credit was unsustainable.

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Issues: Whether Cenvat credit could be availed on the strength of supplementary invoices issued by the supplier unit where the additional duty became payable on account of undervaluation detected by the department and the demand was confirmed on the ground of deliberate evasion.

Analysis: Rule 7(1)(b) of the Cenvat Credit Rules, 2001, as continued in the Cenvat Credit Rules, 2002, permits supplementary invoices only for additional duty paid after clearance, but not where the duty becomes recoverable because of non-levy or short-levy arising from fraud, suppression of facts, or contravention of the Act or the Rules with intent to evade duty. The departmental finding was that the supplier had undervalued the goods removed during the relevant period and had paid differential duty only after detection. Those findings were not rebutted, and the Commissioner (Appeals) had no basis to treat the supplementary invoices as valid credit documents.

Conclusion: Cenvat credit on the supplementary invoices was not admissible, and the order allowing the credit was /unsustainable. The appeal succeeded in favour of the Revenue.

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