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2009 (8) TMI 865 - AT - Central ExcisePrecedents - Stay/Dispensation of pre-deposit - CENVAT / MODVAT credit - whether the CENVAT Credit shall be allowed on the inputs used by the job worker in the processing of goods received under Rule 4(5)(a) of CCR, 2004?
Issues Involved:
1. Waiver of pre-deposit of duties, penalties, and interest. 2. Eligibility of Cenvat Credit on inputs used by a job worker under Rule 4(5)(a) of Cenvat Credit Rules, 2004. Detailed Analysis: 1. Waiver of Pre-Deposit of Duties, Penalties, and Interest: The appellants filed applications for the waiver of pre-deposit of duties amounting to Rs. 27,75,460/- and Rs. 11,81,524/-, along with equivalent penalties and interest for the periods Feb'07 to Dec'07 and Jan'08 to April'08 respectively. The tribunal noted that the appellants did not make out an irresistible case for the waiver of the full amount of duties, interest, and penalties, nor did they plead any financial hardship. Consequently, the tribunal directed the appellants to deposit the full amount of duties within eight weeks, with compliance to be reported on 13-10-09. Failure to comply would result in the vacation of stay and dismissal of their appeals. 2. Eligibility of Cenvat Credit on Inputs Used by a Job Worker: The core issue was whether Cenvat Credit should be allowed on inputs used by the job worker (M/s. Tata Motors Ltd.) in processing goods received under Rule 4(5)(a) of the Cenvat Credit Rules, 2004. The appellants contended that the issue was covered by the decision of the Larger Bench of CESTAT, New Delhi in Sterlite Industries (I) Ltd. v. C.C.E., Pune. The respondent opposed this, arguing that the decision in Sterlite Industries did not correctly apply the law laid down by the Apex Court in Escorts Ltd. The tribunal examined the relevant statutory provisions, including Rules 2(h), 2(k), 3, and 4(5)(a) of the Cenvat Credit Rules, 2004, and found that: - A manufacturer of final products can avail Cenvat Credit on inputs received and used in the factory for manufacturing the final product. - The Cenvat Credit can be utilized for payment of duty on the final product or for payment of an amount equal to the Cenvat Credit taken on inputs if such inputs are removed as such or after being partially processed. - There is no provision allowing the job worker to take Cenvat Credit on their own goods used in processing job-worked goods. In the present case, M/s. Tata Motors used paints from their stock for painting car body shells received from M/s. FIAPL under Rule 4(5)(a) and returned the painted shells without payment of duty. The tribunal noted that the final product (car) was manufactured by M/s. FIAPL, not M/s. Tata Motors, and the paints used by the job worker could not be treated as inputs for M/s. FIAPL for availing Cenvat Credit. The tribunal distinguished the facts and law in the Sterlite Industries case, noting that the interpretation adopted by the Tribunal in that case was not in line with judicial pronouncements of higher forums, including the High Courts and the Apex Court. The tribunal emphasized that compliance with the Rules is mandatory, even if it leads to mechanical application or additional paperwork. The tribunal referred to the Supreme Court's decision in Escorts Ltd., which held that parts manufactured and cleared from one factory to another factory of the same manufacturer do not make the parts the final product, and credit would still be allowed as long as duty is paid on the final product. However, in the present case, M/s. Tata Motors and M/s. FIAPL were not the same manufacturer, and the painted body shells were cleared without payment of duty. The tribunal concluded that the principles laid down by the Supreme Court in Escorts Ltd. were not correctly applied in the Sterlite case. The tribunal reiterated that the Cenvat Credit scheme allows credit to be taken only when the resultant product is cleared on payment of duty or on reversal of the Cenvat Credit. In summary, the tribunal held that M/s. Tata Motors, as a job worker, was not entitled to Cenvat Credit on inputs used in the manufacture of goods cleared under job work challans without payment of duty. The tribunal directed the appellants to deposit the full amount of duties as a pre-condition for hearing the appeals, with penalties and interest to be stayed pending compliance.
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