2006 (5) TMI 410 - AT - Central Excise

Summary

Issues: Disallowance of input duty credit for job work; Challenge of penalty, duty, and interest; Applicability of decision by Larger Bench.

Issue 1: Disallowance of input duty credit for job work
The appellant received materials for job work from the principal manufacturer and returned them without payment of duty under Rule 4(5)(a) of the Cenvat Credit Rules, 2001. Additionally, the appellant used some inputs directly for job work and claimed input duty credit. The Department disallowed the credit. The appellant's representative argued that a similar situation was considered by the Larger Bench in the case of Sterlite Industries (I) Ltd. v. CCE, Pune, where it was concluded that inputs used in the manufacture of final products cleared without duty payment after job work should not be considered as used in exempted goods. Therefore, the appellant contended they were entitled to the credit based on the Larger Bench's decision.

Issue 2: Challenge of penalty, duty, and interest
The Senior Departmental Representative highlighted that the Commissioner (Appeals) had noted the appellant's challenge only to the penalty, not the duty and interest. However, the appellant's Chartered Accountant demonstrated from the grounds of appeal that relief had been sought concerning the credit reversed and interest amount before the lower appellate authority. Consequently, the Tribunal set aside the impugned order and allowed the appeal with consequential relief, aligning with the decision of the Larger Bench.

In conclusion, the Tribunal ruled in favor of the appellant, holding that they were entitled to the input duty credit for job work based on the precedent set by the Larger Bench's decision. The appeal was allowed, overturning the disallowance of credit by the Department. The issue of challenging penalty, duty, and interest was clarified, and the appellant's entitlement to relief regarding credit reversal and interest amount was recognized.