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CX - Revenue cannot, without re-assessing CE duty paid at end of supplier manufacturer, deny credit of said duty in hands of recipient: CESTAT

By TIOL News Service

MUMBAI, APRIL 20, 2017: THE issue is - Whether Revenue can, without re-assessing the Central Excise duty paid at the end of the manufacturer-supplier, deny credit of the said duty paid in the hands of the recipient of such goods, on the premise that no such excise duty ought to have been paid by the manufacturer-supplier.

The adjudicating authority upheld the denial of credit in the hands of the assessee, while the Commissioner (Appeals) allowed the assessee's appeal by following the ratio laid down by the Tribunal in the assessee's own case in order no. A/478-479/III/SMC/WZB/06 dated 27.1.2006. Incidentally, Revenue had preferred an appeal against the said CESTATorder which was disposed by the Bombay High Court by remanding the matter back to the Tribunal. See 2008-TIOL-28-HC-MUM-CX. However, on remand, Tribunal vide Order No. A/183-184/2011/WB/C-IV/SMB dated 31.5.2011 again upheld the assessee's eligibility to avail credit of the duty paid by the supplier.

Be that as it may, in the present context, the Revenue is aggrieved by the Orders of the Commissioner (Appeals) and has preferred these appeals.

The AR submitted that Inox (the supplier) should not have paid the differential duty in respect of that quantity of the Nitrogen/Cracked Ammonia which the assessee had failed to off-take though agreed for in the agreement. It is his submission that since gas qua the quantity in respect of which differential excise duty has been paid was not received, the assessee was not eligible to avail the benefit of cenvat credit in respect of the same.

The respondent assessee submitted that if the supply contract with Inox was read in its entirety, it would clearly come out that the concessional price at which clearances were made by Inox were agreed upon, subject to the undertaking by the assessee, to uplift a minimum quantity, if the assessee agreed for a lower off take, as has actually transpired, the supplier would have initially itself charged much higher price, which is represented by the invoice for the differential duty payment and consequently there was no infirmity in the assessee availing credit of the differential duty paid. Additionally, it is argued that no proceedings for re-assessment and consequent refund of the alleged excess duty paid have been initiated at the end of Inox and that it is settled law that unless proceedings against the manufacturer for re-assessing the duty paid by him and refunding the excess duty paid were initiated, no proceedings for denying credit could be initiated against the recipient unit. Case laws cited are 2011-TIOL-557-HC-MUM-CX, 2008-TIOL-245-SC-CX.

The Bench observed -

"…appeals can be disposed of only on the ground that the Revenue was not entitled to question the correctness of the duty paid by the manufacturer, at the end of the recipient of the goods, without there being any challenge to the assessment to duty at the end of the manufacturer. The law in this regards being settled by the Hon'ble jurisdictional High Court in the case of Nestle India Ltd, the appeals by the Revenue to the contrary are clearly not maintainable…."

Holding that there is no merit in the appeals filed by the Revenue, the same were dismissed.

(See 2017-TIOL-1320-CESTAT-MUM)


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