Cenvat credit on duty on discounted amount

[akhilesh dubey]

Cenvat credit on duty on discounted amount is admissible or not? Example: Manufacturer 'A' has purchase input for Rs. 1000. He availed cenvat credit Rs. 103 on excise duty paid as mentioned in bill amount. At the time of payment manufacturer received dicount of Rs. 200 from the saler. Is the manufacturer is entitle to avail credit of duty attributable on Rs. 200? Kindly quote rule / judgement on your support. Akhilesh Dubey Patna

[sv bhasker]

Dear Mr Akhilesh,

Manufacturer is eligible for credit attributable to discounted price of Rs 200/-as per Board circular No. 877/15/2008-CE dt 17.11.2008. 

[akhilesh dubey]

Dear Mr. Bhasker, Thanks for your quick reply. As per said circular 'but subsequently the supplier allows some trade discount or reduces the price, without reducing the duty paid by him' and 'However, if the duty paid is also reduced, along with the reduction in price, the reduced excise duty would only be available as credit'. How it can be establish from the invoice that supplier allows trade discount or reduces the price without reducing the duty paid by the manufacturer. Regards, Akhilesh Dubey

[sv bhasker]

Sir, you may have to seek information from the manufactuerer "A"  regarding the discounts and decide whether the case fits in the clarification of the Board. You will not know from the original invoice about the nature of discounts.

[YAGAY and SUN]

Since Trade discount doesnot form part of consideration hence you will not be able to avail CENVAT credit on this amount.

[Sanjay Sharma]

CENVAT credit reversal not required when trade discount given subsequently- When credit is availed as per duty amount mentioned in invoice but subsequently trade discount is allowed or price is reduced and duty is not reduced, whether proportionate credit should be reversed.

 

It is clarified that the entire amount of duty paid as shown in the invoice would be available as credit in such cases, because as per rule 3 of Cenvat credit Rules, 2004 allows credit of duty “ paid” by the input manufacturer (supplier in this case) and not duty “payable”  by the said manufacturer. But this is subject to the condition that duty amount is not varied. If the duty amount is also reduced, then such reduced amount alone would be admissible as credit.

 

Further in this case it is advisable to the manufacturer to ensure that the supplier has not filed or claimed any refund on reduction of price.

 

CBEC. Circular No. 877/15/2008-CX, Dt- 17/11/2008

 

Regards

Sanjay Sharma

AI Summary

Cenvat credit on duty: allowed where duty is shown and paid despite trade discount, unless duty itself is reduced.
Cenvat credit is available where the supplier has paid duty and the duty amount is shown in the invoice, even if a subsequent trade discount or price reduction is given, so long as the duty amount is not varied; if duty is reduced, only the reduced duty is admissible, and the purchaser should confirm that the supplier has not claimed refund or altered the duty paid.