Cenvat credit may be used for differential duty arising on supplementary invoices when price escalation is crystallised later.

Where duty liability on revised prices crystallises only upon issue of supplementary invoices, Cenvat credit available at that time may be used to pay the resulting differential excise duty. Rule 3(4) of the Cenvat Credit Rules, 2004 permits credit utilisation for payment of duty on final products, and the proviso was treated as governing routine period-wise duty payments rather than later-arising liabilities. The supplementary invoice was therefore viewed as creating a duty obligation on the date of issue, and the credit in November 2006 was sufficient. The demand was not sustainable and relief was granted to the assessee.

---

---

Issues: Whether differential duty raised through supplementary invoices on account of post-clearance price escalation could be discharged using Cenvat credit available in the month when the supplementary invoices were issued, and whether the proviso to Rule 3(4) of the Cenvat Credit Rules, 2004 restricted such utilization by reference to the period of original clearances.

Analysis: The final products had been cleared during April to August 2006 on the then-adopted value, and no short payment existed at the time of removal. The revised cost of production and consequent duty liability were crystallised only in November 2006, when supplementary invoices were issued and the differential duty was paid through the credit account. Rule 3(4) permits Cenvat credit to be used for payment of duty of excise on any final product, and the proviso was held to govern routine credit utilisation for period-wise duty payments, not a liability that arose only upon later crystallisation through supplementary invoices. The supplementary invoice mechanism was treated as reflecting a duty liability arising on the date of issue, and the available credit in November 2006 was sufficient. The decision was supported by the principle laid down in the cited Gujarat High Court ruling on transaction value and later-arising liability.

Conclusion: The differential duty could validly be discharged from the Cenvat credit available in November 2006, and the restriction in the proviso to Rule 3(4) did not bar such utilisation.

Final Conclusion: The demand could not be sustained, and the assessee was entitled to the relief claimed in the appeal.

Ratio Decidendi: Where duty liability on account of a revised price is crystallised only upon issuance of supplementary invoices, the assessee may utilise Cenvat credit available at that time for payment of the resulting differential duty, and the proviso to Rule 3(4) does not confine such payment to credit available during the period of original clearances.

---