2008 (6) TMI 389 - AT - Central Excise

Entitlement to Cenvat Credit: Tribunal Seeks Larger Bench Clarification on Fraud, Settlement Commission, Pre-Deposit

The Tribunal referred questions to a Larger Bench regarding entitlement to Cenvat credit based on a supplementary invoice when additional duty is paid due ... Cenvat/Modvat - Stay/Dispensation of pre-deposit Issues Involved:1. Entitlement to Cenvat credit on the basis of supplementary invoice.2. Effect of filing an application before the Settlement Commission on admission of facts.3. Requirement of specific findings by the Settlement Commission regarding suppression of facts.Summary:Issue 1: Entitlement to Cenvat credit on the basis of supplementary invoiceThe dispute revolves around the appellant's entitlement to take Cenvat credit of the differential duty paid by its Jalgaon and Pune units. The Cenvat Credit Rules, 2002 (and the subsequent 2004 Rules) specify that Cenvat credit can be taken based on certain documents, including a 'supplementary invoice'. However, if the additional duty became recoverable due to fraud, collusion, or wilful misstatement or suppression of facts, the supplementary invoice is not admissible for taking credit. The Tribunal noted that there is no express provision denying Cenvat credit in such cases, but the exception in Rule 7(1)(b) implies that credit cannot be claimed if additional duty was paid due to fraud or suppression of facts.Issue 2: Effect of filing an application before the Settlement Commission on admission of factsThe appellant's Jalgaon unit had filed an application u/s 32E of the Central Excise Act before the Settlement Commission after paying the entire duty demand. The appellant argued that filing such an application does not amount to an admission of the allegations in the show cause notice unless a specific finding of fraud or suppression is recorded by the Settlement Commission. The Tribunal referenced the case of Essar Steel Ltd., where it was held that mere filing of a petition before the Settlement Commission cannot be considered as an admission of guilt.Issue 3: Requirement of specific findings by the Settlement Commission regarding suppression of factsThe Tribunal noted that the Settlement Commission, in its final order, did not grant waiver of interest, observing that the appellant had derived financial gain by not paying the duty when it was due. The Tribunal raised the question of whether the Settlement Commission is required to record a specific finding regarding suppression of facts, and in the absence of such a finding, whether the appellant can be disqualified from taking Cenvat credit.Conclusion:The Tribunal referred the following questions to a Larger Bench for consideration:1. Whether the assessee is entitled to take Cenvat credit on the basis of supplementary invoice when additional duty is paid suo motu on receipt of a show cause notice alleging wilful misstatement or suppression of facts.2. Whether filing an application before the Settlement Commission for waiver of interest and penalty after paying the entire duty demand amounts to an admission of the facts alleged in the show cause notice.3. Whether the Settlement Commission must record a specific finding regarding suppression of facts, and in the absence of such a finding, whether the applicant can be disqualified from taking Cenvat credit.Interim Order:Pending the decision of the Larger Bench, the Tribunal dispensed with the pre-deposit of duty and penalty and stayed the recovery as per the order-in-original of the Commissioner of Central Excise.