2009 (2) TMI 621 - AT - Central Excise

Summary

Issues:
- Whether the appellant is entitled to Cenvat credit for the second time on the same capital goods sent for processing?
- Whether the capital goods were cleared under Rule 3(4) for job work purposes?
- Whether the appellant should have reversed the Cenvat credit originally taken on the printing cylinders before taking credit for the second time?
- Whether the decision in the case of Modernova Plastyles Pvt. Ltd. is applicable to the present case?

Analysis:
- The respondent, a manufacturer of printed bags/films/poly bags, sent worn-out printing cylinders for engraving, rechroming, and reengraving to job workers. The job workers paid duty on the reconditioned cylinders, which the respondent then took as credit. The original authority held that taking credit for the second time was incorrect as the capital goods were not cleared under Rule 3(4) for job work, leading to demands and penalties.
- The Commissioner (Appeals) allowed the appeal, stating that the denial of Cenvat credit was based on the grounds of availing credit for the second time on the same capital goods. The appellant argued that the cylinders, after becoming defective, were considered Base Shell requiring processing, which amounted to manufacturing new products. As the job workers paid duty on the reconditioned cylinders, the appellant was entitled to Cenvat credit under Rule 7 of the Cenvat Credit Rules.
- The learned DR contended that the second-time credit taken by the respondents was not in order, citing the decision in Modernova Plastyles Pvt. Ltd. The appellant's advocate argued that as the cylinders were removed for reconditioning under Rule 4(5)(a), the question of reversing Cenvat credit did not arise. The job workers paid duty on the reconditioned cylinders, justifying the appellant's credit claim.
- The Tribunal found that the capital goods were not cleared as such but after being used for their intended purpose. As there was no demand for unreversed Cenvat credit at the time of clearance, the invocation of Rule 3(5) was deemed unnecessary. The job worker paying excise duty on the reconditioned cylinders and the availability of Cenvat credit justified the appellant's credit claim, ensuring revenue neutrality.
- Ultimately, the Tribunal upheld the Commissioner (Appeals)'s order, rejecting the appeals as no infirmity was found in the decision.