CESTAT Upholds CENVAT Credit Eligibility on Supplementary Invoices Absent Supplier Suppression
The availability of input tax credit on supplementary invoices has frequently been a subject of intense litigation between the revenue department and the assessee. The core of these disputes often revolves around the intent of the supplier at the time of the original short-payment of duty. In a significant ruling, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) New Delhi has clarified the boundaries of credit eligibility in the case of Bharat Aluminium Company Limited Vs Commissioner of Central Excise and Service.
The Tribunal decisively ruled that an assessee cannot be denied CENVAT credit on supplementary invoices if the underlying short-payment by the supplier was not driven by fraud, collusion, willful misstatement, or suppression of facts. This article provides a comprehensive summary of the judicial pronouncement, the statutory framework governing the dispute, and the broader implications for businesses dealing with supplementary tax documentation.
Factual Matrix of the Dispute
The controversy originated from transactions between the assessee, Bharat Aluminium Company Limited, and its coal supplier, South Eastern Coalfields Limited (SCCL). During the initial clearance of coal, SCCL excluded specific components—namely royalty, entry tax, and forest transit fees—from the assessable value. The supplier operated under the belief that these elements constituted taxes and were, therefore, not includible in the assessable value for the computation of central excise duty.
Subsequently, a valuation dispute arose regarding the exclusion of these charges. Addressing the discrepancy, SCCL remitted the differential central excise duty to the government exchequer and concurrently issued supplementary invoices to the assessee. Relying on these supplementary documents, the assessee availed a CENVAT credit amounting to Rs. 6,51,22,158/-.
The Adjudicating Authority's Intervention
The revenue department scrutinized the credit availed by the assessee. As per the order dated 30.01.2018, the Principal Commissioner disallowed the CENVAT credit of Rs. 6,51,22,158/-. The adjudicating authority concluded that the initial short-payment of duty by the supplier, SCCL, was a direct result of the suppression of facts with an intent to evade tax.
Consequently, the Principal Commissioner initiated recovery proceedings against the assessee under Rule 14 of the CENVAT Credit Rules, 2004, read in conjunction with Section 11A(4) of the Central Excise Act, 1944. Furthermore, the order demanded interest under Section 11AA of the Act and imposed an equivalent penalty under Rule 15(2) of the CENVAT Credit Rules, 2004, read with Section 11AC of the Central Excise Act, 1944.