Appellate Tribunal Denies Modvat Credit Over Supplier's Duty Evasion Allegations

The appellate tribunal addressed the issue of disallowing Modvat credit amounting to Rs. 98,770/- availed by the appellant based on supplementary invoices issued by the supplier, in accordance with Rule 7(1)(b) of the Cenvat Credit Rules 2002. The tribunal held that the appellant was not entitled to take credit for the duty paid through supplementary invoices as the supplier faced allegations of misdeclaration with intent to evade duty payment, which were not contested. Consequently, the appeal was found to lack merit and was rejected.

---

---

Issues involved: Modvat credit disallowed u/s Rule 7(1)(b) of Cenvat Credit Rules 2002 based on supplementary invoices issued by the supplier.

Summary:
The appellate tribunal addressed the issue of disallowing Modvat credit amounting to Rs. 98,770/- availed by the appellant based on supplementary invoices issued by the supplier, in accordance with Rule 7(1)(b) of the Cenvat Credit Rules 2002. The rule allows the credit on such invoices unless the duty becomes recoverable from the manufacturer of the inputs due to fraud, collusion, willful misstatement, or contravention of the Act to evade duty payment. The appellant's supplier, M/s. B.N. Enterprises, faced a show cause notice for short payment of duty and misdeclaration with intent to evade duty payment. Although M/s. B.N. Enterprises settled the matter by paying the duty, the appellant's dispute centered around availing Modvat credit based on duty paid by the supplier through supplementary invoices.

The tribunal noted that Rule 7(1)(b) provides an exception to availing credit if the duty payment is due to contravention of the Act with intent to evade duty payment. Since the input manufacturer (M/s. B.N. Enterprises) did not contest the show cause notice alleging misdeclaration, it was deemed that they accepted the allegations. Consequently, the appellant was held not entitled to take credit for the duty paid through supplementary invoices. The appeal was found to lack merit and was rejected accordingly.

---