2012 (5) TMI 357 - AT - Central Excise

Tribunal rules in favor of appellants for CENVAT credit, setting aside penalties.

The Tribunal ruled in favor of the appellants, allowing them to take the credit on the strength of the supplementary invoices. The penalties imposed on ... Whether the appellants are entitled to take CENVAT credit on the strength of supplementary invoices which has been raised on them by their supplier as per the agreement - there was an agreement between the supplier and the appellants that if the appellants failed to lift the required quantity, the price of the cracked ammonia gas will be changed and extra amount for that shall be charged from the appellants for which these supplementary invoices has been raised on the appellants on which proper duty has been paid by the supplier – Held that:- in the case of MDS Switchgear Ltd. (2008 (8) TMI 37 - SUPREME COURT - Central Excise) as the supplementary invoice has been raised for the minimum agreed quantity by the appellant is nothing but the escalated amount of the goods received by them, appellants are entitled to take the credit on the strength of the supplementary invoices, appeals are allowed Issues:1. Denial of CENVAT credit based on supplementary invoices2. Applicability of interest and penalty3. Interpretation of agreement terms4. Entitlement to CENVAT credit5. Invocation of extended period for proceedingsAnalysis:Issue 1: Denial of CENVAT credit based on supplementary invoicesThe appellants contested the denial of CENVAT credit based on supplementary invoices, arguing that the invoices were raised as per Clause 2.3 of the agreement by the supplier. They emphasized that the supplementary invoices were for goods received through regular invoices, and duty had been paid on them. The appellants asserted that they were entitled to the credit as per law, citing relevant judgments. The Revenue, however, contended that no credit could be taken without actual receipt of goods. The Tribunal examined the agreement terms and found that the supplementary invoices were raised for the escalated amount of goods received by the appellants due to not lifting the minimum agreed quantity. Ultimately, the Tribunal ruled in favor of the appellants, allowing them to take the credit on the strength of the supplementary invoices.Issue 2: Applicability of interest and penaltyThe impugned order had confirmed the denial of CENVAT credit, imposed interest, and levied penalties on the appellants. The appellants challenged these penalties, arguing that they were entitled to the credit as per the agreement terms and relevant legal precedents. The Tribunal, after analyzing the agreement and considering the duty paid on the supplementary invoices, concluded that the appellants were indeed entitled to the credit. Consequently, the Tribunal set aside the penalties imposed on the appellants.Issue 3: Interpretation of agreement termsThe case revolved around the interpretation of the agreement terms between the supplier and the appellants regarding the lifting of a minimum quantity of cracked ammonia gas. The Tribunal scrutinized the clauses of the agreement, particularly Clause 2.3, which specified the consequences of failing to lift the agreed quantity. By delving into the agreement provisions, the Tribunal determined that the supplementary invoices were raised in accordance with the contractual terms, justifying the appellants' claim for CENVAT credit.Issue 4: Entitlement to CENVAT creditThe core issue was whether the appellants were entitled to avail CENVAT credit based on the supplementary invoices issued by the supplier. Both parties presented their arguments, with the appellants asserting their right to the credit due to duty payment on the supplementary invoices. The Tribunal, after thorough consideration of the agreement and legal principles, upheld the appellants' claim, emphasizing that the supplementary invoices represented the escalated amount of goods received by the appellants, warranting the allowance of CENVAT credit.Issue 5: Invocation of extended period for proceedingsThe question of invoking the extended period for proceedings arose, with the Revenue contending that the extended period was applicable due to lack of clarity in the monthly returns filed by the appellants. However, the Tribunal noted that the appellants had been regularly filing returns and that the show-cause notice was issued within a reasonable timeframe. As the appellants succeeded on the merits of the case, the Tribunal did not delve into the aspect of limitation and allowed the appeals, setting aside the impugned order.