2010 (1) TMI 1087 - AT - Central Excise

Summary

Issues:
Department's appeal against Commissioner (Appeals) order dated 3-4-2006, regarding demand of duty on job worker, Cenvat credit reversal, and refund claim.

Analysis:
The appeal involved the Department challenging the order of the Commissioner (Appeals) regarding the demand of duty on a job worker, Cenvat credit reversal, and a subsequent refund claim. The respondent, a manufacturer of cylinders, supplied materials to a job worker for manufacturing foot rings and VS plates. The job worker faced duty demand due to irregularities, which was paid and credited by the respondent. The Department contended that the job worker's duty demand invoked the extended period of limitation, implying fraud or misstatement, thus disallowing the respondent's credit. However, the Commissioner (Appeals) allowed the refund, noting that no penalty was imposed on the job worker, attributing the non-payment to ignorance.

The Commissioner (Appeals) found that Rule 9(1)(b) of Cenvat Credit Rules, 2004 did not apply, allowing the respondent to claim credit for the duty paid by the job worker. The original authority acknowledged the non-payment by the job worker was due to ignorance, not fraud or collusion. The rule prohibits credit in cases of non-levy due to fraud or wilful misstatement. As the authorities confirmed the job worker's non-payment was due to ignorance, the exception under Rule 9(1)(b) did not apply. Consequently, the appeal was rejected, upholding the Commissioner (Appeals) decision to allow the refund claim based on the job worker's ignorance as the reason for non-payment.

In conclusion, the judgment clarified that the respondent was eligible to claim credit for duty paid by the job worker, as the non-payment was attributed to ignorance rather than fraud or misstatement. The decision highlighted the importance of determining the intent behind non-payment in such cases and affirmed the Commissioner (Appeals) ruling in favor of the respondent's refund claim.