CENVAT credit is admissible on supplementary invoices absent fraud, collusion, wilful misstatement, or suppression.

Bharat Aluminium Company Limited (“BALCO”) availed CENVAT credit of ₹6,51,22,158 on the basis of supplementary invoices issued by South Eastern Coalfields Limited (“SECL”) for coal supplied to BALCO.

SECL had initially excluded amounts such as royalty, entry tax and forest transit fees while determining the assessable value and paying central excise duty.

Following a dispute, SECL paid differential duty and issued supplementary invoices to BALCO.

The Commissioner held that the differential duty arose from suppression of facts and denied BALCO the corresponding CENVAT credit under Rule 9(1)(b) of the CENVAT Credit Rules, 2004 (“CCR”), besides ordering recovery with interest and imposing an equivalent penalty.

During the appeal, BALCO relied on an earlier Tribunal decision concerning SECL, which held that the short-payment was not attributable to fraud, collusion, wilful misstatement or suppression of facts.

Whether supplementary invoices issued by SECL were eligible documents for availing CENVAT credit under Rule 9(1)(b) of the CCR.

Whether the differential excise duty paid by SECL resulted from fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade duty, thereby attracting the exclusion under Rule 9(1)(b).

Whether the denial of CENVAT credit, recovery of the amount with interest, and imposition of penalty on BALCO were sustainable.

Rule 9(1)(b) of the CCR permits CENVAT credit on the basis of supplementary invoices issued for additional excise duty, but excludes such credit where the additional duty became recoverable due to non-levy or short-levy resulting from fraud, collusion, wilful misstatement, suppression of facts, or contravention of the Central Excise Act, Customs Act, or rules with intent to evade duty.

Rule 14 of the CCR, read with Sections 11A(4) and 11AA of the Central Excise Act, 1944, governs recovery of wrongly availed credit and interest, while Rule 15(2) of the CCR, read with Section 11AC of the Act, provides for penalty in cases involving the specified fraudulent or deliberate conduct.

The Tribunal’s earlier decision in SECL’s appeals held that the short-payment was not due to fraud, collusion, wilful misstatement or suppression of facts and consequently set aside extended limitation and the penalty under Section 11AC.

The eligibility of BALCO’s credit depended on whether SECL’s differential duty payment fell within the exclusion in Rule 9(1)(b).

Although SECL had initially excluded royalty, entry tax and forest transit fees from the assessable value, the Tribunal had already determined in SECL’s own appeals that the resulting short-payment was not caused by fraud, collusion, wilful misstatement or suppression of facts.

Since the statutory exclusion under Rule 9(1)(b) was therefore not attracted, the supplementary invoices remained valid prescribed documents for CENVAT credit.

Consequently, the Commissioner’s finding of suppression and the consequential recovery, interest and penalty could not be sustained.

The appeal was allowed, the impugned order was set aside, and consequential relief was granted to BALCO.