Stock Transfers Not Barred from Cenvat Credit Under Rule 9(1)(b): CESTAT [Read Order]

The Ahmedabad bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that stock transfers between units of the same company are not barred from availing Cenvat credit under Rule 9(1)(b) of the Cenvat Credit Rules, 2004.

The main issue in this case is whether the appellant could avail of Cenvat credit on supplementary invoices issued for duty paid on stock transfers. The department had denied the credit, invoking Rule 9(1)(b), which restricts credit on supplementary invoices issued due to fraud, collusion, or willful misstatement with intent to evade duty.

It was contended by the appellant that Rule 9(1)(b) applies only to transactions involving the sale of goods, not stock transfers.

The bench by going through the provisions of Rule 9(1)(b) concluded that the restriction applies only to transactions involving the sale of goods.

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 Since the goods in question were transferred between the appellant's own units and not sold, the tribunal ruled that Rule 9(1)(b) was not applicable. The tribunal also noted that the invoices for stock transfers did not involve VAT, further supporting the appellant's case.

The bench relied on several precedents, including the Karnataka High Court's decision in Karnataka Soaps & Detergents Ltd Vs. CCE Mysore/Bangalore- 2005 (192) ELT 892 (Tri.-Bang.) which held that stock transfers are not subject to the restrictions under Rule 9(1)(b).

The bench also noted the case of Essar Oil Ltd. vs. Commissioner of Central Excise, Rajkot, where it was held that Cenvat credit could not be denied on supplementary invoices for stock transfers.

The CESTAT held that the denial of Cenvat credit on stock transfers was without legal authority and that the appellant was entitled to the credit.

The bench, by relying on several precedents, reached a conclusion that the impugned order was not sustainable.

The CESTAT, comprising Ramesh Nair (Judicial Member) and C.L. Mahar (Technical Member), allowed the appeal in favour of the assessee and set aside the impugned order.

To Read the full text of the Order CLICK HERE

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