2013 (7) TMI 532 - AT - Central Excise

Appellant entitled to Cenvat credit post-discount; Board Circulars binding in tax matters

The Tribunal held that the appellant is entitled to Cenvat credit even after receiving a discount from the input supplier. It emphasized that the duty ... Cenvat Credit, when the input supplier has reduced the value of the goods – Input supplier was required to pay less duty and, as such, the input recipient that is the appellant, would be entitled to less Cenvat credit – Held that:- As per Board Circular No. 877/15/2008-CX dated 17/11/2008, Since, the discount in such cases are given in respect of the value of inputs and not in respect of the duty paid by the supplier, the effect of reduction of value of inputs may be that the duty required to be paid on the inputs was less than what has been actually paid by the inputs manufacturer. However, the fact remains that the inputs manufacturer had paid the higher duty - Rule 3 of Cenvat Credit Rules, 2004 allows credit of duty paid by the inputs manufacturer and not duty payable by the said manufacturer. The entire amount of duty paid by the manufacturer, as shown in the invoice would be available as credit irrespective of the fact that subsequent to clearance of the goods, the price is reduced by way of discount or otherwise - If the lower authorities, even after the clarifications issued by the Board, keep on the deciding the matters contrary to the said clarifications, it lowers the public faith in the fair and just trial/adjudication by the departmental officers – Decided in favor of Assessee. Issues:1. Whether the appellant is entitled to Cenvat credit after receiving a discount from the input supplier.2. The applicability and binding nature of Board Circulars on departmental authorities in tax matters.Analysis:1. The first issue revolves around the appellant availing Cenvat credit of duty paid by the input supplier, who later provided a 10% discount on the inputs. The Revenue contended that since the input supplier reduced the value of goods, the duty payable was less, thus entitling the appellant to a reduced Cenvat credit. The Tribunal referred to a Board Circular clarifying that the duty paid by the inputs manufacturer is eligible for credit under Rule 3 of Cenvat Credit Rules, regardless of subsequent price reductions. The Circular emphasized that the duty paid is crucial for credit availability, not the duty payable. The Tribunal also highlighted past judgments supporting this view, emphasizing the importance of following such clarifications to reduce litigation.2. The second issue addresses the binding nature of Board Circulars on departmental authorities. The Tribunal reiterated that Circulars issued by the Board are legally binding on Revenue officers, as established by the Supreme Court. Failure to adhere to such clarifications undermines public trust in fair adjudication and increases unnecessary litigation. The Tribunal referenced previous decisions where adherence to Tribunal rulings by lower authorities could have prevented prolonged legal disputes. In this case, the Tribunal set aside the lower authority's decision and allowed the appeal, emphasizing the importance of following established legal principles and Circulars to streamline tax adjudication processes and reduce appeal burdens.In conclusion, the judgment clarified the entitlement of Cenvat credit in cases of input supplier discounts and underscored the significance of following Board Circulars to ensure consistency and fairness in tax adjudication.