2009 (10) TMI 815 - AT - Central Excise

Summary

Issues Involved:
1. Whether the appellants were required to reverse the Cenvat credit on inputs sent for job work.
2. Whether the transactions between the appellants and job workers were on a principal-to-principal basis.
3. Whether the plea of revenue neutrality was applicable.

Summary:

1. Reversal of Cenvat Credit on Inputs Sent for Job Work:
The appellants, M/s. Contech Instruments Ltd., sent inputs such as inductor coil, hybrid circuits, heat sink thermistors, etc., to M/s. Leo Circuit Boards Pvt. Ltd. and M/s. Hermes Electronics for job work under Rule 4(5)(a) of the Cenvat Credit Rules. The job workers fitted these inputs on PCBs and cleared them to the appellants on payment of Central Excise duty. The Assistant Commissioner dropped the Show Cause Notice demanding reversal of Cenvat credit, finding no revenue loss as duty was paid by the job workers. The Commissioner (Appeals) reversed this decision, stating the appellants should have reversed the credit as the transactions were on a principal-to-principal basis.

2. Principal-to-Principal Basis Transactions:
The Commissioner (Appeals) held that the transactions were on a principal-to-principal basis because the appellants placed purchase orders for PCBs, which were supplied on payment of duty. However, the Tribunal found that the inputs were sent for processing under job work challans, and the assembled PCBs were used in manufacturing Electronic Balances. The Tribunal concluded that the appellants were entitled to Cenvat credit on the inputs and the duty paid on assembled PCBs.

3. Revenue Neutrality:
The Tribunal held that the issue was revenue neutral as the appellants were entitled to Cenvat credit on both the inputs sent for processing and the assembled PCBs received. The Tribunal cited several decisions, including *Commissioner of C. Ex. & Cus., Vadodara v. Narmada Chematur Pharmaceuticals Ltd.* and *Commissioner of Cus. & C. Ex. v. Textile Corporation Marathwada Ltd.*, to support the principle of revenue neutrality. The Tribunal rejected the argument that revenue neutrality could only be raised before the Apex Court and High Courts, stating that it is a question of fact within the Tribunal's purview.

Conclusion:
The Tribunal set aside the order of the Commissioner (Appeals) and allowed the appeal, holding that the appellants were not required to reverse the Cenvat credit on inputs sent for job work, and the transactions were not on a principal-to-principal basis. The Tribunal emphasized the revenue-neutral nature of the case, granting consequential relief to the appellants.