Job worker entitled to CENVAT credit on supplier's supplementary invoices for differential duty in stock transfer transactions

CESTAT Ahmedabad allowed the appeal where job worker was denied CENVAT credit on supplementary invoices issued by supplier for differential duty payment. The tribunal held that Rule 9(1)(b) of CENVAT Credit Rules 2004 restricting credit on supplementary invoices applies only to sale transactions, not stock transfers for job work. Since goods were received on returnable basis without consideration and ownership remained with supplier, the transaction was not a sale. Penalties on both appellant job worker and supplier were set aside as credit was rightfully available and supplier's supplementary invoice issuance was proper.

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Issues Involved:
1. Whether the credit availed by the appellant job worker based on supplementary invoices issued by Hindustan Unilever Ltd. is deniable under Rule 9(1)(b) of CENVAT Credit Rules, 2004.
2. Whether penalties under Section 11 AC(1)(c) of Central Excise Act upon the appellant and under Rule 26 (2) upon Hindustan Unilever Ltd. are imposable.

Summary:

Issue 1: Denial of Credit under Rule 9(1)(b) of CENVAT Credit Rules, 2004

The appellant argued that Rule 9(1)(b) applies only when goods are sold, not when received for job work on a returnable basis. The Tribunal agreed, noting that the goods were received for job work and not sold, thus Rule 9(1)(b) does not apply. The Tribunal cited multiple precedents, including Jai Raj Ispat Ltd., Karnataka Soaps & Detergents, and United Phosphorus Ltd., which support the view that the restriction on availing credit on supplementary invoices is not applicable in cases of stock transfers or job work.

The Tribunal emphasized that the transaction between the appellant and Hindustan Unilever Ltd. was not a sale, as defined under Section 2(h) of the Central Excise Act, because there was no transfer of possession for consideration. Therefore, the appellant is entitled to CENVAT Credit on the supplementary invoices issued by Hindustan Unilever Ltd.

Issue 2: Imposition of Penalties

Since the demand of CENVAT Credit itself was found unsustainable, the Tribunal held that no penalties could be imposed on the appellant or Hindustan Unilever Ltd. The Tribunal noted that Hindustan Unilever Ltd. had not aided or abetted any wrong credit availing by the appellant and had correctly issued the supplementary invoices. Thus, penalties under Section 11 AC(1)(c) and Rule 26 (2) were not applicable.

Conclusion:

The Tribunal set aside the impugned order, allowing the appeals, and ruled that the appellant is entitled to the CENVAT Credit on the supplementary invoices. Consequently, no penalties were imposed on either the appellant or Hindustan Unilever Ltd.

(Pronounced in the open Court on 19.10.2023)

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