2006 (7) TMI 55 - AT - Central Excise

Tribunal rules in favor of appellants on Cenvat credit reversal; emphasizes need for supplier verification

KEDIA ELECTRICALS LTD. Versus CCE, HYDERABAD

The Tribunal allowed the appeal, ruling in favor of the appellants. It held that the Department could not compel the appellants to reverse Cenvat credit ... Central Excise – Cenvat credit – Appellant received discount from supplier on later stage but supplier had not claimed refund of excess duty paid on account of reduction in price – Credit of excess duty refundable on account of discount, not deniable in the absence of any investigation Issues:1. Availment of Cenvat credit on duty paid by supplier.2. Reversal of Cenvat credit due to cash discount received.3. Jurisdiction of Central Excise authorities in re-assessment.4. Evidence of supplier claiming refund on excess duty paid.5. Department's authority to compel reversal of credit.Analysis:The appeal was filed against an Order-in-Appeal passed by the Commissioner of Customs & Central Excise, Hyderabad. The appellants had availed Cenvat Credit of duty paid by the supplier on certain inputs. Subsequently, they received cash discounts on the invoices, but did not reverse the proportionate Cenvat credit initially availed. The Assistant Commissioner demanded repayment, interest, and imposed a penalty. The Commissioner (Appeals) remanded the case, noting that confirming the demand without verifying facts was unjustifiable. The appellants contested this decision, arguing that they had taken credit based on the duty indicated in the invoices, with no obligation to reverse credit for discounts not claimed by the supplier.During the proceedings, the appellants' representative referenced previous cases to support their argument, highlighting the lack of jurisdiction for re-assessment by Central Excise authorities in such scenarios. The Joint CDR acknowledged the absence of evidence showing the supplier claimed a refund due to price reductions. The Tribunal carefully reviewed the case records and noted that the appellants had availed Cenvat credit based on actual duty paid by the suppliers as per the invoices. The Tribunal ruled that the Department could not compel the appellants to reverse the credit for discounts received later, unless it was proven that the supplier had obtained a refund. As no such investigation had been conducted, the Tribunal allowed the appeal, providing relief to the appellants. However, the Department retained the right to take action based on any future investigations at the supplier's end, as per the law.In conclusion, the Tribunal set aside the demand against the appellants, emphasizing the need for proper investigation before compelling reversal of Cenvat credit. The decision highlighted the importance of verifying facts and supplier actions before imposing penalties or repayment obligations on the appellants.