2005 (12) TMI 468 - AT - Central Excise

Summary

Issues:
- Validity of Cenvat credit on duty paid for single yarn based on the invoices issued by the appellants for despatch of doubled yarn from job workers.

Analysis:
The appellants, engaged in cotton yarn manufacturing, removed single yarn to job workers for conversion into double yarn during a specific period. The doubled yarn received from job workers was further processed and cleared by the appellants after payment of duty. The appellants availed Cenvat credit of Rs. 1,75,157/- on the single yarn based on their own invoices. However, both the original authority and the first appellate authority disallowed this credit, stating that the appellants' invoices were not valid documents for Cenvat credit purposes.

Upon examination, the crucial issue was whether the Cenvat credit on duty paid for single yarn could be denied to the appellants due to the alleged invalidity of their invoices covering the despatch of doubled yarn from job workers. The Tribunal referred to a previous case where a similar question was addressed and decided in favor of the assessee. The Tribunal emphasized that there is no prohibition on availing credit based on one's own invoices as long as the input was used in the final product's manufacture, and the duty paid nature of the input was established.

The Tribunal highlighted that the appellants had followed the proper procedure by issuing invoices for the single yarn despatched to job workers, who then sent back the doubled yarn to the appellants' factory with their delivery challans. The doubled yarn received was an intermediate product further processed into the final product and cleared after duty payment. Therefore, the appellants were well within their rights to claim Cenvat credit on the single yarn based on their invoices, as per Rule 5(a) of the Cenvat Credit Rules, 2001/2002.

In line with the precedent and the established legal principles, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellants. The judgment reiterated the validity of claiming Cenvat credit based on the appellants' own invoices in this specific scenario, emphasizing the compliance with the relevant rules and procedures governing such credit availment.