Tribunal Upholds Cenvat Credit for Intra-Company Stock Transfers

The Tribunal upheld the decision of the Commissioner (Appeals) allowing Cenvat credit amounting to Rs. 35,43,588/- based on supplementary invoices issued by a manufacturing unit within the same company. Despite Revenue's argument citing Rule 7(1)(b) of the Cenvat Credit Rules, 2001, the Tribunal relied on precedents from other High Courts to support the allowance of credit for stock transfers between units of the same company. The Tribunal dismissed Revenue's appeal, affirming the decision to grant Cenvat credit and disposing of the cross objection.

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Issues: Revenue's appeal against disallowance of Cenvat credit based on supplementary invoices.

The judgment revolves around the appeal filed by Revenue against the disallowance of Cenvat credit amounting to Rs. 35,43,588/- based on supplementary invoices issued by a manufacturing unit. The case involved allegations of suppression of facts by the manufacturing unit, leading to a demand for disallowance of the Cenvat credit. The Settlement Commission had granted immunity to the manufacturing unit from penalty and interest. The Revenue challenged the decision before the Commissioner (Appeals), who allowed the Cenvat credit and set aside the demand.

In the appeal, the Revenue contended that Rule 7(1)(b) of the Cenvat Credit Rules, 2001 prohibits the allowance of credit based on supplementary invoices issued after payment of duty due to demand sustaining suppression. On the other hand, the respondent argued that as the credit transfer was between two units of the same company, there was no misdeclaration or suppression involved. The respondent also highlighted that the department was informed about availing credit based on supplementary invoices. The respondent relied on case laws to support their argument.

The Cenvat credit in question was availed by the respondent unit based on supplementary invoices issued by another unit of the same company. The investigation revealed discrepancies in the valuation of finished products cleared to another unit. The Settlement Commission had resolved the matter, and the differential duty was paid, leading to the issuance of supplementary invoices for the credit taken.

The Tribunal referred to similar cases decided by the High Courts of Karnataka and Andhra Pradesh, where credit on supplementary invoices for stock transfer between units of the same company was allowed despite the embargo under Rule 7(1)(b). Relying on these precedents, the Tribunal upheld the impugned order, dismissing Revenue's appeal and disposing of the cross objection accordingly.

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