Doctrine of Revenue Neutrality Applicable when Assessee not reversing Cenvat Credit on Inputs and Sister Concerns are also eligible to take Credit: Bombay HC [Read Judgment]

Revenue Neutrality

In M/s. Sanvijay Rolling & Engineering Ltd, the Bombay High Court held that the doctrine of revenue neutrality is applicable when the assessee does not reverse cenvat credit on inputs and the sister concerns of the assessee are also eligible to take credit.

Assessee, in the instant case is a company duly registered and incorporated under the Companies Act 1956 and engaged in manufacture of rolled products of iron and steel. There are six factories of M/s Sanvijay Group of industries and the Assessee in the present case is one of the factories. It has stated that the Assessee as well as the other units received the duty paid blooms, which is their main raw material used for the manufacture of different types of rolled products and take cenvat credit of the duty paid on the raw materials received from the supplier.

However, the preventive bench of Central Excise Headquarters has visited the factory of the Assessee and verified the stocks of inputs as well as finished goods was undertaken. The shortage was noticed as far as inputs are concerned, to the extent of 3.367 Metric Tons and also came to the conclusion that there was no proper explanation provided. It was declared that the Assessee had taken wrong credit of Rs.21,14,189 on the inputs which were received and consumed in another factory of Sanvijay Group whereas only duty paying documents were received in the factory of the appellants.

The  counsel for the Assessee Advocate Mr. Sridharan submitted that credit has been denied on the ground that the goods were actually delivered to the other factory of the Assessees. If the credit is denied to the appellants, the same should be allowed to the other factory where the goods were alleged to be actually delivered. He further submitted that the entire excise of denial of credit is revenue neutral inasmuch as credit is available to the other factory of the appellants manufacturing the same products and with identical inputs. In these circumstances, there was no question of any suppression with intent to evade payment of duty.

After analyzing the above narrated facts and circumstances, Justice Bharati.H.Dangre and Justice S.C.Dharmadhikari observed that “the Assessee derive no benefit by not reversing cenvat credit on inputs, when sister concerns are also eligible to take that credit, then, in the absence of any cognes and reliable evidence particularly on the diversion of input, the principle or doctrine of Revenue neutrality applicable in the present case, because the Assessee not reversing cenvat credit on inputs and sister concerns of the Assessee are also eligible to take that credit”.

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