2009 (5) TMI 734 - AT - Central Excise

Summary

Issues involved: Denial of Cenvat Credit on furnace oil used in job work manufacturing; Interpretation of Notification No. 214/1986-C.E.; Applicability of Tribunal's Larger Bench decision in context of Rule 6 of Cenvat Credit Rules.

Summary:

1. The appellants, engaged in manufacturing M.S. Bars and Sections, faced proceedings for denial of Cenvat Credit on furnace oil used in job work manufacturing. The dispute arose as the goods were cleared without payment of duty to the principle manufacturer under Notification No. 214/1986. The original adjudicating authority did not follow the Tribunal's Larger Bench decision, leading to a demand against the appellant.

2. On appeal, the Commissioner (Appeals) acknowledged the similarity between erstwhile Rule 57F and 57C and present Rule 6, applying the Tribunal's decision that inputs used in job work manufacturing would be eligible for credit. However, credit was denied due to lack of evidence showing duty payment by the principle manufacturer on the final product.

3. The appellant's advocate argued that the essence of Notification No. 214/86 is that the principle manufacturer must use the goods in the manufacture of dutiable final products. The Commissioner's observation regarding duty payment was deemed baseless, as the appellant had disclosed the duty payment in their filings. The denial of credit was not part of the show cause notice, and the appellant was not notified of this ground.

4. The learned SDR supported the Commissioner's reasoning.

5. The appellate authority found in favor of the appellant, stating that the Larger Bench decision applied even under Rule 6. The rejection of the appeal based on lack of evidence of duty payment by the principle manufacturer was deemed unjustified. The doubt raised by the authorities regarding duty payment was unfounded, considering the provisions of Notification No. 214/86 and the appellant's compliance with job work terms. The impugned order was set aside.

6. The appeal was allowed, granting consequential relief to the appellant, and the stay petition was disposed of.