Cenvat Credit availment on supplementary invoices for inter-unit stock transfers ruled legal under Rule 9(b)

CESTAT Ahmedabad allowed appeals regarding wrongful availment of Cenvat Credit on 4% Special Additional Duty of Excise based on supplementary invoices. The tribunal held that stock transfers between units of the same entity do not constitute sales requiring SAD payment. Since SAD payment was not mandatory for inter-unit transfers, no suppression or willful misstatement occurred. The transaction involved revenue neutrality between related units, making Rule 9(b) of Cenvat Credit Rules inapplicable. The appellant's Cenvat Credit availment on supplementary invoices was deemed legal and correct, resulting in the impugned order being set aside.

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Issues Involved:
1. Wrongful availment of Cenvat Credit on Special Additional Duty of Excise (SAD).
2. Applicability of Rule 9(1)(b) of Cenvat Credit Rules, 2004.
3. Suppression of facts, willful misstatement, and revenue neutrality.
4. Personal penalty imposed under Rule 26(1) of Central Excise Rules, 2002.

Issue-wise Detailed Analysis:

1. Wrongful Availment of Cenvat Credit on Special Additional Duty of Excise (SAD):
The appellant was found to have availed Cenvat Credit of 4% SAD based on supplementary invoices issued by their sister unit, which was a 100% EOU and de-bonded from 12.10.2011. The department contended that this credit was inadmissible under Rule 9(b) of Cenvat Credit Rules, 2004, as the duty was not paid by the sister unit due to fraud, collusion, or willful misstatement.

2. Applicability of Rule 9(1)(b) of Cenvat Credit Rules, 2004:
The appellant argued that their sister unit was not liable to pay SAD as the transaction was a stock transfer and not a sale. This argument was supported by multiple judgments, including Skipperseil Limited v. CCE, Alwar, and CCE Jaipur v. Autolite India Ltd., which established that no SAD is payable on stock transfers between units of the same entity. The Tribunal agreed with this argument, stating that since the sister unit was not liable to pay SAD, Rule 9(1)(b) was not applicable.

3. Suppression of Facts, Willful Misstatement, and Revenue Neutrality:
The appellant contended that even though their sister unit settled its case under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, there was no suppression of facts or willful misstatement as SAD was not payable in the first place. The Tribunal found that since the transaction involved a stock transfer and not a sale, there was no suppression of facts or willful misstatement. The Tribunal also noted that the transaction was revenue-neutral as it was between units of the same entity, further negating the applicability of Rule 9(1)(b).

4. Personal Penalty Imposed under Rule 26(1) of Central Excise Rules, 2002:
The appeal by Shri Manohar Maheshwari, General Manager of the appellant company, sought relief from the personal penalty imposed under Rule 26(1). Since the demand against the company was found to be unsustainable, the penalty on Shri Manohar Maheshwari was also deemed unsustainable.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeals and confirming that the appellant's availment of Cenvat Credit on supplementary invoices was legal and correct. Consequently, the personal penalty imposed on Shri Manohar Maheshwari was also set aside. The judgment was pronounced in the open court on 13.08.2024.

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