The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has set aside the denial of CENVAT credit exceeding ₹6.51 crore after finding that supplementary invoices issued by the input supplier were valid documents under Rule 9(1)(b) of the CENVAT Credit Rules, 2004.
The bench of Dr. Rachna Gupta (Officiating President) and P. V. Subba Rao (Technical Member) has observed that the restriction under Rule 9(1)(b) would apply only where the additional duty became recoverable from the supplier because of fraud, collusion, wilful misstatement, suppression of facts or a deliberate contravention intended to evade duty.
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The dispute concerned CENVAT credit of ₹6,51,22,158 availed by the company on the strength of supplementary invoices issued by South Eastern Coalfields Limited (SECL), which had supplied coal to the appellant.
The Principal Commissioner had disallowed the credit and ordered its recovery under Rule 14 of the CENVAT Credit Rules read with Section 11A(4) of the Central Excise Act, 1944. The adjudicating authority had also demanded interest and imposed a penalty equal to the disputed credit under Rule 15(2) of the CENVAT Credit Rules read with Section 11AC of the Central Excise Act.
SECL had initially calculated and paid central excise duty after excluding certain amounts, including royalty, entry tax and forest transit fees, from the assessable value of the coal supplied to the appellant.
The supplier treated these amounts as taxes and charges that were not includable in the assessable value for determining central excise duty. After the valuation position was disputed by the department, SECL paid the differential excise duty and issued supplementary invoices to Bharat Aluminium Company.
On the basis of those invoices, the appellant claimed CENVAT credit for the additional duty paid by the supplier.
The adjudicating authority, however, concluded that the differential duty had become payable because SECL had suppressed material facts. It consequently held that the supplementary invoices were hit by the exception contained in Rule 9(1)(b) and could not support the appellant’s CENVAT credit claim.
CESTAT observed that Rule 9 of the CENVAT Credit Rules specifies the documents on the strength of which a manufacturer of excisable goods or a provider of taxable services may avail credit of duty paid on inputs and service tax paid on input services.
Rule 9(1)(b) specifically recognises a supplementary invoice issued by a manufacturer or importer of inputs or capital goods as a valid document for taking credit where an additional amount of excise or customs duty has been paid.
However, the rule excludes supplementary invoices where the additional duty became recoverable because of fraud, collusion, wilful misstatement, suppression of facts or contravention of the excise or customs laws with an intention to evade payment of duty.
The Tribunal said the decisive question was therefore whether SECL’s initial short payment of duty had resulted from any of these ingredients.
Counsel for Bharat Aluminium informed the Tribunal that SECL had separately challenged the demands raised against it over the disputed valuation components.
Those appeals were decided by CESTAT through a common final order dated February 6, 2026. In that decision, the Tribunal examined not only the merits of the valuation dispute but also whether the extended period of limitation could be invoked against SECL and whether a penalty under Section 11AC of the Central Excise Act was sustainable.
The Tribunal had specifically found that the supplier’s non-payment or short payment of duty was not attributable to fraud, collusion, wilful misstatement or suppression of facts.
Consequently, the demand for the extended period and the penalty imposed on the supplier had been set aside.
Relying on the findings recorded in the proceedings against SECL, the CESTAT held that the essential condition for excluding the supplementary invoices under Rule 9(1)(b) was absent.
Since it had already been determined that the supplier’s short payment was not caused by fraud, collusion, wilful misstatement or suppression, the supplementary invoices issued after payment of differential duty remained valid documents for taking CENVAT credit.
The Tribunal therefore concluded that Bharat Aluminium had correctly availed the disputed credit of ₹6.51 crore.
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