Saturday, November 1, 2014

Cenvat credit couldn’t be denied merely because original manufacturer of inputs was non-traceable

Where assessee had complied with all procedures in availing of credit and had taken all steps in accordance with law, credit could not be denied merely because original manufacturer of inputs was not traceable.


a)The department invoked extended period of limitation to deny credit taken by assessee on ground that original manufacturer could not be traced. The Tribunal relied upon its earlier order dated 24-1-2011 and upheld denial.

b)The Assessee argued that order (dated 24-1-2011) of Tribunal was reversed in Prayagraj Dyeing & Printing Mills (P.) Ltd v. Union of India [2013] 30 TAXMANN.COM 139/38 STT 525 (GUJ.).

The High Court held in favour of assessee as under:

1)In case of Prayagraj Dyeing & Printing Mills's case (supra) it was held that if document (based on which credit was taken) was issued even by fraud, extended period of limitation could not be invoked against a holder in due course unless he was shown to be a party to a fraud.

2)Without elaborate reasons, present appeal was allowed on same lines, as was done in case of Prayagraj Dyeing (supra). Order of Tribunal was to be reversed accordingly. – KIRTIDA SILK MILLS V. C.C.E.C. [2014] 50 TAXMANN.COM 264 (GUJARAT)