2023 (10) TMI 1298 - AT - Central Excise

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

Hindustan Unilever Ltd. and Indu Home Care Products Versus C.C.E & S.T. -Valsad

CESTAT Ahmedabad allowed the appeal where job worker was denied CENVAT credit on supplementary invoices issued by supplier for differential duty payment. ... CENVAT Credit - credit availed by the appellant job worker based on supplementary invoices issued by Hindustan Unilever Ltd paying differential duty on the Bulk Detergent Powder, stock transferred to the appellant M/s. Indu Home Care Product - deniable on the ground of payment of such additional duty by Hindustan Unilever Ltd allegedly on account of suppression, etc. under Rule 9(1)(b) of CENVAT Credit Rules, 2004 - penalties under Section 11 AC(1)(c) of Central Excise Act upon the appellant - penalties under Rule 26 (2) upon HUL. HELD THAT:- From Rule 9 (1) (b) of CENVAT Credit Rules 2004, it can be seen that the restriction of availment of credit on supplementary invoice is applicable in a case where the manufacturer supplier of inputs or capital goods not paid the duty or short paid the duty by reason of fraud, collusion or any wilful mis-statement or suppression of facts or contravention of any provision of the Excise Act or of the Customs Act or the Rules made thereunder with intend to evade payment of duty only when such clearance is in the nature of sale of goods - In the present case the appellant is a job worker and they have received the goods on which CENVAT Credit was taken as a job worker, for the purpose of job work on behalf of M/s Hindustan Unilever Ltd. In this fact, the goods were received on returnable basis which does not involve the sale of goods as defined under Section 2(h) of Central Excise Act. The ownership of goods remained with supplier M/s. Hindustan Unilever Ltd. As against the supply of goods there is no consideration paid by the appellant to M/s. Hindustan Unilever Ltd. Therefore, the transaction is clearly not covered under ‘sale’ of goods by M/s. Hindustan Unilever Ltd to the appellant. Therefore the combined reading of Rule 9 (1)(b) and Section 2(h), it is clear that only in a case of sale of goods, the restriction of CENVAT Credit on supplementary invoice is applicable. In the present case, the transaction being not a sale transaction the restriction shall not apply. From the consistent view taken by the Tribunal and the courts it is settled that in a case where there is no sale of goods and only a stock transfer the restriction of availment of CENVAT Credit on supplementary invoice in case of non-payment or short payment of duty by the supplier unit shall not apply - Reliance placed in COMMISSIONER OF CUS. & C. EXCISE, HYDERABAD-IV VERSUS JAIRAJ ISPAT LIMITED [2008 (2) TMI 440 - ANDHRA PRADESH HIGH COURT] and UNITED PHOSPHORUS LTD. VERSUS COMMISSIONER OF C. EX. & S.T., SURAT-II [2013 (11) TMI 1530 - CESTAT AHMEDABAD] where it was held that when there is simply a stock transfer the prohibition under Rule 7(1)(b) will not be applicable. Penalties - HELD THAT:- The appellants are entitled to the CENVAT Credit on the strength of supplementary invoices issue by M/s. Hindustan Unilever Ltd. consequently the penalties on the appellant as well as on the Hindustan Unilever Ltd shall also not sustain - Moreover, as regard the penalty on Hindustan Unilever Ltd as per the nature of the present case, there is no involvement of M/s. Hindustan Unilever Ltd in alleged wrong availment of CENVAT Credit by the appellant M/s. Indu Home Care Products. M/s. Hindustan Unilever Ltd rightly issued the supplementary invoice towards the payment of differential duty and the said issuance of the supplementary invoice is not illegal or incorrect. It is upto the appellant M/s. Indu Home Care Products, whether to avail CENVAT Credit or otherwise. Therefore, in any case, in the facts of the present case M/s. Hindustan Unilever Ltd cannot be fastened with any penalty under Rule 26 (2) of Central Excise Rules, 2002. The impugned order is not sustainable, hence the same is set aside - Appeal allowed. 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, 2004The 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 PenaltiesSince 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)