2016 (11) TMI 42 - AT - Central Excise

Tribunal overturns tax credit reversal orders and penalties citing precedent. Recipient not liable for supplier's duty.

The Tribunal allowed both appeals, setting aside the impugned orders demanding reversal of cenvat credit and penalties. The decision was influenced by a ... Cenvat credit - excess credit - credit on the of the duty on freight and insurance charges - Held that: - identical issue was before the Tribunal in the case of Hindalco Industries Ltd. [2014 (11) TMI 156 - CESTAT NEW DELHI], wherein the Tribunal held in favour of appellant therein on merits itself, holding that the inputs supplier’s assessment cannot be changed at the recipient’s end - Appeal allowed. Issues:1. Availment of ineligible cenvat credit by the appellant.2. Reversal of excess credit availed by the appellant.3. Applicability of judgment in a similar case involving Hindalco Industries Ltd.4. Imposition of penalties on the appellant and Guwahati Carbon Ltd.Analysis:Issue 1: The appellant, a company purchasing calcined petroleum coke from another company, availed cenvat credit of the duty paid by the supplier. However, it was discovered that the supplier had inflated the assessable value by including freight and insurance charges, resulting in excess duty payment. The authorities held the appellant liable for availing ineligible cenvat credit, leading to a show cause notice, demand recovery, interest, and penalties. The lower authorities relied on a Tribunal decision related to the supplier's case to support their findings.Issue 2: The appellant contested the demand for reversal of excess credit by arguing that a similar issue involving the same supplier was decided in favor of Hindalco Industries Ltd. by the Tribunal. The Tribunal in Hindalco Industries Ltd.'s case held that the recipient cannot be held responsible for the supplier's actions regarding duty payment. Consequently, the Tribunal in the present case held that the demand for central excise duty from the appellant was unsustainable and set aside the impugned order.Issue 3: The Tribunal's decision in Hindalco Industries Ltd.'s case was crucial in determining the outcome of the present case. The judgment established a precedent that the recipient of goods cannot be penalized for the supplier's duty payment discrepancies, especially when the issue pertains to the same supplier and product.Issue 4: Additionally, the Tribunal noted that penalties imposed on both the appellant and the supplier were unsustainable. The Tribunal referenced a case before the Punjab and Haryana High Court where penalties on the supplier were set aside, further supporting the decision to set aside the penalties in the present case.In conclusion, the Tribunal allowed both appeals, set aside the impugned orders, and held that the demands for reversal of cenvat credit and penalties were unsustainable based on the legal precedents and judgments cited during the proceedings.