2009 (1) TMI 564 - AT - Central Excise

Cenvat/Modvat - Reversal of credit - job-work - Held that - There is no condition under Rule 4(5)(b) of Cenvat Credit Rules that moulds sent by the respondents has to be brought back within 180 days and failure to do so would render the respondents liable to reverse the Cenvat credit availed on the same - appeal dismissed.

Summary

Issues:

1. Appeal against dropping the demand for reversal of Cenvat credit on moulds sent to job workers.

Analysis:

The case involved an appeal by the Revenue against the dropping of a demand for the reversal of Cenvat credit amounting to Rs. 4,92,320 on moulds sent to job workers for manufacturing goods. The Revenue contended that the moulds should have been returned within 180 days, as per Rule 4(5)(a) of the Cenvat Credit Rules. However, the respondents argued that the condition of returning goods within 180 days was not applicable to the moulds sent for production. The Tribunal noted that Rule 4(5)(b) did not specify a 180-day return condition for moulds and that the supplementary instructions from the CBEC supported this interpretation. Therefore, the Tribunal rejected the Revenue's appeal, finding no merit in their argument.

In the detailed analysis, it was highlighted that the respondents were engaged in the manufacture of excisable goods falling under Chapter 39 of the Central Excise Tariff Act, 1985. The Commissioner (Appeals) had previously dropped the demand for reversing the Cenvat credit on moulds sent to job workers. The Revenue, in their appeal, argued that the moulds should have been returned within 180 days based on Rule 4(5)(a) of the Cenvat Credit Rules. On the other hand, the respondents contended that this condition did not apply to the moulds sent for production. The Tribunal carefully considered both submissions and pointed out that Rule 4(5)(b) did not impose a 180-day return requirement for the moulds. Additionally, the Tribunal referred to the supplementary instructions from the CBEC, which clarified that the 180-day condition was specific to certain types of goods and not applicable to the moulds sent for production. Consequently, the Tribunal rejected the Revenue's appeal, emphasizing that the Cenvat credit availed by the respondents on the moulds did not need to be reversed due to the absence of a 180-day return stipulation.

In conclusion, the Tribunal's judgment upheld the decision to drop the demand for reversing the Cenvat credit on moulds sent to job workers. The Tribunal found that Rule 4(5)(b) did not mandate the return of moulds within 180 days and that the supplementary instructions from the CBEC supported this interpretation. As a result, the Tribunal rejected the Revenue's appeal, ruling in favor of the respondents and affirming that the Cenvat credit availed on the moulds did not need to be reversed.