CENVAT credit on stock-transferred imported inputs upheld where documentation was proper and suppression for extended limitation was not shown

CENVAT credit on imported inputs remained admissible where the goods were stock transferred under proper invoices to a sister concern for manufacture of the final product, and the department failed to show diversion or any material mismatch in description. Variations between Bills of Entry and stock-transfer invoices were treated as explained by duties, cess and profit element, while the descriptions were substantially similar. The extended period of limitation was also unavailable because the assessee filed returns openly and no wilful mis-statement or suppression with intent to evade duty was established. The denial of credit and the consequential demand were therefore unsustainable.

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Issues: (i) Whether CENVAT credit on imported inputs was admissible when the inputs were stock transferred to a sister concern for use in manufacture of the final product and the documents showed variations in description and value. (ii) Whether the demand was barred by limitation in the absence of wilful mis-statement or suppression of facts.

Issue (i): Whether CENVAT credit on imported inputs was admissible when the inputs were stock transferred to a sister concern for use in manufacture of the final product and the documents showed variations in description and value.

Analysis: The inputs imported by the appellant were transferred under proper invoices to its sister concern, which was not shown to be lacking in manufacture or clearance of the final product. The department did not establish diversion or alienation of the inputs. The difference in value between the Bills of Entry and the stock-transfer invoices was explained by inclusion of duties, cess and profit element in the invoices, while the Bills of Entry reflected assessable import value. The descriptions in the documents were found to be substantially similar and the variations were not material enough to deny credit.

Conclusion: The credit was held admissible and the disallowance was unjustified.

Issue (ii): Whether the demand was barred by limitation in the absence of wilful mis-statement or suppression of facts.

Analysis: The show cause notice covered the period much earlier than its date, while the appellant had been filing periodic returns and availing credit openly. No material established wilful mis-statement or suppression with intent to evade duty. In the absence of such ingredients, the extended period could not be invoked.

Conclusion: The demand was held time-barred.

Final Conclusion: The denial of credit and the consequent demand could not be sustained, and the appellant succeeded on merits as well as on limitation.

Ratio Decidendi: CENVAT credit cannot be denied merely because imported inputs are stock transferred to another unit for manufacture, where the transfer is documented and no diversion is shown, and the extended period is unavailable absent wilful suppression or mis-statement.

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