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cenvat credit on Credit Note

Anoop Garg (FCA) (120 Points)

14 January 2009

suppose manufacturer gave rate deduction credit note then will the differential excise duty paid earlier be restored as cenvat.example below suppose inv raised by A Rs 1000 say date.5 jan Exc duty charged @ 10% Rs100 Later on Buyer raised Dbt Note for rate Diff on Excise Invoice i.e Basic Rs 200+ Rs 20 Excise duty.Manufacturer A accepted it.Dt 10 Jan Will the Orig manufacturer A is entiteled for cenvat Credit of Rs 20 in relation Dt 10 Transaction?Pls Answer

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7 Replies

Rajesh Kumar (Advocate- Tax) (7806 Points)
Replied 14 January 2009

Yes. The buyer is entitled for cenvat credit. However, mere credit note is not a sufficient document to take credit. The supplier should make a supplementary invoice,and balance duty should be paid on supplementary invoice. On the basis of this supplementary invoice cenvat credit may be taken.

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Anoop Garg (FCA) (120 Points)
Replied 15 January 2009

Dear Rajesh nice to c u on this topic,My query is different the case is Manufacturer'A'reduced the price(not increasing it so no case of Supplementary invoice)thorough Credit Note the buyer in synth raised debit note on Excise invoice. Exple First Transaction Inv raised 10 Ton @ Rs 1000 Pmt Invoice By 'A'i.e Basic 10000 + 1000( excise Duty)=11000

Second transaction

Rate reduced by Rs200 PMT.Buyer 'B'raised debit note on Excise Invoice Rs 200 x 10 ton + excise 200=2200.

The question is whether Mr 'A' is entiteled to take Cenvat of Rs 200 (Charged by buyer 'B'on deduction).

In above case Rs 1000 duty deposited by 'A" Orig Manfrr.

Rs 200 duty by 'B' Buyer leading to unjust enrichment of Rs 200 to Deptt.If A is allowed cenvat then this unjust enrichment vanished.Please give your opinion in light specific sections and citations.

Anoop Garg (FCA) (120 Points)
Replied 15 January 2009

The second transaction is related to first Invoice by A.This is a case of subsequent price decrease by manufactrer on earlier supplied on which he charged excise now the price is reduced on earlier supply through Cr Note and in Synth Debit Note on ex inv by buyer.

Pavan Jain S (Chartered Accountant) (1575 Points)
Replied 15 January 2009

Transaction value for the purpose of levy shall be the value as at the date of removal. Subsequent reduction in price shall not entitle the assessee to claim refund of duty. Hence, subsequent price reduction do not entitle Mr.A to take cenvat credit of differential amount.

However, if it is likely at the time of removal of goods that there will be price reduction in future, say.. by way of discount, then assessee can request the AO for provisional assessment .

In my opinion, Mr. A is not entitled to take cenvat credit of the differential duty.

Rajesh Kumar (Advocate- Tax) (7806 Points)
Replied 15 January 2009

If subsequently price is decreased, the credit note should be issued only for the sales consideration, and not for the duty portion.

In that case the buyer will be entitled to take credit of the total amount of duty paid at the time of removal of goods, notwithstanding any price reduction subsequently. The issue is well settled in numerous judgments. look for Trinetra [2004 (166) ELT 384]. The issue has also been settled in Supreme Court Judgment in case of MRF [1997 (92) ELT 309].