To reverse cenvat credit availed on Feb.13

[SURYAKANT MITHBAVKAR]

We have purchased goods from our vendor in Feb.13 and availed cenvat credit on that.

Now, Excise department given us notice that reverse the same since our vendor has not paid the duty on it.

pl advice whether we have to reverse or not. if not pl give us any judgement so we can give them reply.

[YAGAY andSUN]

Dear Suryakan

If, you had made full payment (including Central Excise Duty duly charged by vendor) against the supplies of goods and if, there is no collusion, fraud, involvement between vendor and your organization, then, you can avail the CENVAT credit on the goods supplied by the Vendor, otherwise not.

There is no requirement to reverse the CENVAT credit but you would get the relief from the Hon'ble Tribunal.

Regards,

Team YAGAY & SUN

(Management & Indirect Tax Consultants)

[SURESH ASTEKAR]

You may rely on the following decisions:

MODVAT credit - supplier of inputs had not discharged full duty liability for the period covered by the invoices - The proviso postulates and requires “reasonable care” and not verification from the department whether the duty stands paid by the manufacturer-seller - credit allowed --Commissioner of Central Excise, Jalandhar Versus M/s. Kay Kay Industries = 2013 (8) TMI 772 - SUPREME COURT

Availment of CENVAT Credit - Reasonable steps / care to be taken before availing Cenvat Credit - Duty paying documents - Violation of the provisions of Rule 3, 9(3) & Rule 7 of the Cenvat Credit Rules, 2004 - Held that:- both the Commissioner (Appeals) and the Tribunal have given cogent reasons to indicate that the assessee had taken reasonable steps to ensure that the inputs in respect of which he has taken the cenvat credit are goods on which the appropriate duty of excise, as indicated in the documents accompanying the goods, has been paid. Admittedly, in the present case, the assessee was a bona fide purchaser of the goods for a price which included the duty element and payment was made by cheque. The assessee had received the inputs which were entered in the statutory records maintained by the assessee. 

The goods were demonstrated to have travelled to the premises of the assessee under the cover of Form 31 issued by the Trade Tax Department, and the ledger account as well as the statutory records establish the receipt of the goods. In such a situation, it would be impractical to require the assessee to go behind the records maintained by the first stage dealer. The assessee, in the present case, was found to have duly acted with all reasonable diligence in its dealings with the first stage dealer - Decided against Revenue. The Commissioner of Central Excise Customs & Service Tax Versus M/s. Juhi Alloys Ltd., Anil Kumar Shukla-2014 (1) TMI 1475 - ALLAHABAD HIGH COURT

[SURESH ASTEKAR]

One more case law:

Commissioner of Central Excise Vs. Tata Motors Ltd., - 2013 (294) ELT 394 (Jhar.), = 2010 (9) TMI 949 - JHARKHAND HIGH COURT

[YAGAY andSUN]

Dear All,

In addition to above inputs, we clarify that Rule 9(3) of the CENVAT credit Rules, 2004 has been struck out long back by the Department.  Therefore, there is no need to take reasonable care or steps before availing CENVAT Credit.

Regards

Team YAGAY & SUN

(Management & Indirect Tax Consultants)

[Madhukar N Hiregange]

There are several decisions of the Tribunal that the non payment of ED by the vendor cannot disentitle one to credit. In the earliest case the SC in the case of Decent Dying had observed that goods bought in market a presumed to be duty paid.

If all credit availers were to be sure whether the supplier had paid the ED or not, then they would have to audit all of them which is not practicable.

Further the dept would be recovering the duty not paid with interest and penalty from the vendor and if you also do not take credit it would amount to unjust enrichment for the Govt. Article 265 of the COI guarantees that tax cannot be collected without authority of law.

AI Summary

Cenvat credit entitlement upheld where purchaser paid inclusive price and had no collusion; supplier nonpayment need not trigger reversal. Cenvat credit may be retained by a bona fide purchaser who paid an all-inclusive price and who has no collusion or fraud with the vendor; nonpayment of excise by the vendor does not automatically require reversal where the purchaser maintained statutory records and received goods under appropriate documentation, and the department can recover duty from the supplier.