By TIOL News Service

MUMBAI, FEB 09, 2017: THE appellants are engaged in the manufacture of excisable goods viz. Bournvita, Delite, Cocoa Powder, drinking chocolate [Ch. 18 &19] and avail Cenvat Credit.

The appellant had taken Cenvat credit of Rs.10,16,153/- on the supplementary invoice dated 03.08.2004 issued by M/s. Lotus Chocolate Company Ltd., Narsapur . This invoice was issued after case was registered by P&I Wing of Hyderabad against M/s. Lotus Chocolate Co.

The AA disallowed the credit availed on the ground that the supplementary invoice was issued by M/s. Lotus Chocolate Co. in respect of duty which was confirmed invoking extended period under proviso to Section 11A(1) of CEA, 1944.

The Commissioner(A) upheld the order of the AA but set aside the penalty imposed u/s 11AC of the CEA, 1944.

Before the CESTAT, the appellant inter alia submitted that it was not a case of clandestine removal but duty demand is only due to difference in costing of the product, that M/s. Lotus accepted the duty liability and paid duty alongwith interest before issuance of show cause notice and informed the department to close the matter; that there is no categorical finding that M/s. Lotus Chocolate Co has evaded duty by reason of suppression of facts; that ingredient for invoking proviso to Section 11A(1) of CEA, 1944 as well as imposition of penalty u/s 11AC are parimateria ;that penalty imposed u/s 11AC by the AA has been dropped by the Commissioner (Appeals) and whichorder has apparently been accepted by the department. Inasmuch as since there is no suppression of facts on the part of M/s. Lotus, therefore, the denial of credit on the supplementary invoices issued by M/s Lotus is not covered under sub Rule 7(1)(b) of CCR, 2002.

The AR reiterated the findings of the impugned order.

The Bench observed -

+ I find that in the proceedings of M/s. Lotus the adjudicating authority dropped the penalty of Section 11AC on the ground that the assessee had paid duty alongwith interest before issuance of show cause notice.

+ I also observed that issue that there is variation of the valuation adopted by M/s. Lotus for arriving at the assessable value this cannot be treated as suppression of facts. Moreover, M/s. Lotus Chocolate Co admittedly paid differential duty alongwith interest before issuance of show cause notice. Therefore, in terms of sub section (2B) of Section 11A, if the assessee pays duty either on their ownor determined by the department alongwith interest no show cause notice should have been issued.

+ It is also observed that entire transaction from M/s. Lotus Chocolate Co to the appellant and then with the Cadbury are on job work basis and no sale purchase transaction is involved. Accordingly,Cenvat credit on supplementary invoice even for extended period is admissible to the recipient factory of the appellant.

The appeal was allowed with consequential relief.

(See 2017-TIOL-372-CESTAT-MUM)