2009 (4) TMI 934 - AT - Central Excise

CENVAT credit - reversal of - CENVATable inputs - job-work - HCC Bounder tube, anhydrous ammonia, varnishes etc.

Summary

Issues:
1. Whether the assessee is required to reverse the credit on inputs used for job work goods?
2. Interpretation of Cenvat Credit Rules, 2002 in the context of job work activities.
3. Application of Tribunal decisions and Larger Bench decisions on similar issues.

Issue 1: Reversal of Credit on Inputs for Job Work Goods

The case involved a dispute regarding the requirement for the assessee to reverse the credit on inputs used for job work goods. The Revenue issued a show cause notice demanding recovery of credit availed on chemicals and other inputs used for job work processing. The Assistant Commissioner initially dropped the demand, which was upheld by the Commissioner (Appeals). The central issue was whether the assessee, engaged in both manufacturing and job work activities, needed to reverse the credit on inputs used for job work goods.

Issue 2: Interpretation of Cenvat Credit Rules, 2002

The Tribunal analyzed the application of Rule 3 of the Cenvat Credit Rules, 2002 in the context of the assessee's activities. The case involved the utilization of cenvatable inputs for job work processing without reversing the credit. The Tribunal considered the provisions of Rule 12 and 13 of the Cenvat Credit Rules, 2002, along with the demand for recovery, interest, and penalty imposed by the Revenue. The interpretation of these rules was crucial in determining the assessee's liability to reverse the credit on inputs used for job work activities.

Issue 3: Tribunal and Larger Bench Decisions

The Tribunal referred to previous decisions, including a case involving the present assessee, where the issue had been settled. Citing judgments such as Bharat Gears Ltd., Jindal Polymers, and Shree Laxmi Metal Industries, the Tribunal highlighted the consistent interpretation regarding the reversal of credit on inputs for job work goods. The Tribunal also discussed the Larger Bench decision in Sterlite Industries vs. CCE and the subsequent appeal filed by the Revenue before the Mumbai High Court. The rejection of the Revenue's appeal by the High Court based on the Supreme Court's decision in Escorts Limited vs. Commissioner of Central Excise further supported the Tribunal's dismissal of the Revenue's appeal in the present case.

In conclusion, the Tribunal dismissed the Revenue's appeal, emphasizing the settled nature of the issue based on previous decisions and the rejection of the Revenue's appeal by the Mumbai High Court. The judgment reaffirmed the interpretation of the Cenvat Credit Rules, 2002 in the context of job work activities and upheld the decision in favor of the assessee, highlighting the consistent application of legal principles in similar cases.