Appellant entitled to Cenvat Credit despite compensation for project delay The appellant's receipt of compensation from the supplier for project delay did not affect the admissibility of Cenvat Credit on capital goods. The court ...
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Appellant entitled to Cenvat Credit despite compensation for project delay
The appellant's receipt of compensation from the supplier for project delay did not affect the admissibility of Cenvat Credit on capital goods. The court found that the compensation did not reduce the prices of the goods or result in a duty refund for the supplier. Relying on precedent and a CBEC Circular, the court allowed the appeal, setting aside the Order-in-Original and affirming the appellant's right to retain the Cenvat Credit.
Issues: Whether the compensation received by the appellant from the supplier of capital goods will affect the admissibility of Cenvat Credit.
Analysis: The appeal was filed against an Order-in-Appeal dated 11.10.2011, which upheld an Order-in-Original from 17.09.2010. The appellant availed Cenvat Credit on capital goods related to their cold rolling mill in 2006. They received compensation of Rs. 1,00,00,000 from the supplier due to a delay in project completion, as per the agreement terms. The appellant argued that this compensation did not impact the assessable value of the capital goods, making the Cenvat Credit admissible. They cited the case of Bajaj Auto Ltd. vs. Commissioner of C.Ex. & Cus., Aurangabad and a CBEC Circular to support their claim.
The issue in question was whether the compensation received by the appellant would disentitle them from claiming the corresponding Cenvat Credit. The appellant relied on the case law mentioned earlier, which stated that any subsequent reduction in the price of inputs with retrospective effect would not prevent the recipient from taking full Cenvat Credit. The CBEC Circular dated 17.11.2008 also clarified that the duty paid by the manufacturer, as shown in the invoice, would be available as credit regardless of any price reduction later on.
After hearing both sides and examining the case records, it was concluded that the compensation received by the appellant did not lead to a reduction in the prices of the capital goods. The amount received was for the delay in project completion, not a price reduction. There was no evidence that the supplier had obtained any refund on the duty paid on the capital goods. Therefore, based on the case law and the CBEC Circular, the Cenvat Credit availed by the appellant could not be reduced due to the compensation received from the supplier.
As a result, the appeal was allowed, and the Order-in-Original dated 11.10.2011 was set aside.
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