2017 (8) TMI 1158 - AT - Central Excise

Tribunal Upholds Cenvat Credit for Intra-Company Stock Transfers

Commissioner of Central Excise, Pondicherry Versus M/s. Sundaram fasteners Ltd.

The Tribunal upheld the decision of the Commissioner (Appeals) allowing Cenvat credit amounting to Rs. 35,43,588/- based on supplementary invoices issued ... CENVAT credit - stock transfer - supplementary invoices - Rule 7(1)(b) of the Cenvat Credit Rules, 2001 - Held that: - The investigation carried out by DGCEI concluded that the Madurai Unit had incorrectly adopted the value for the purposes of payment of duty for clearances to Chennai Unit. The case was settled at the level of Settlement Commission and the differential duty was paid and supplementary invoices issued based on which such credit have been taken. Similar issue came before Hon'ble High Court of Karnataka in the case of Karnataka Soaps & Detergents Ltd [2010 (2) TMI 524 - KARNATAKA HIGH COURT] in which the Hon'ble High Court held that the embargo under Rule 7(1)(b) cannot come in the way when there is no sale and it was only Stock Transfer between two Units of the same company. Appeal dismissed - decided against Revenue. 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.