2015 (6) TMI 1139 - AT - Central Excise

Re-credit of CENVAT credit reversed erroneously - principles of unjust enrichment - job-work - Held that - Reversal of cenvat credit and taking of such re-credit is only book entries and the appellant demonstrated with the help of documentary evidence that the amount actually reversed was taken as re-credit. In this case the embargo created in Rule 6 ibid will not have any application inasmuch as the job worked goods removed from the factory of the appellant were used by the principal manufacturer for manufacture of excisable goods on which appropriate central excise duty liability has been discharged - The larger benches of this Tribunal in the case of Sterlite Industries (I) Ltd. 2004 (12) TMI 108 - CESTAT MUMBAI has held that the provisions of Rule 57 C of erstwhile Central Excise Rules 1994 (Parimateria to Rule 6 ibid) will not apply to the job worked goods for further utilization in the manufacture of final product which are cleared on payment of duty by the principal manufacture - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Reversal and re-credit of cenvat credit on furnace oil used for job worked goods
- Permissibility of re-credit under the statute and unjust enrichment
- Application of Rule 6 of Cenvat Credit Rules, 2004
- Applicability of judicial precedents on re-credit and suo moto credit

Analysis:

The case involved the appellant, engaged in the manufacture of steel forgings and steel scrap, who undertook job work activities for other manufacturers. The dispute arose when the appellant reversed cenvat credit attributable to the quantity of furnace oil used for manufacturing job worked goods but later re-credited the same, claiming it was wrongly reversed. The Central Excise Department denied the re-credit, citing the absence of a proper invoice and contravention of Rule 6(1) of the Cenvat Credit Rules, 2004. The adjudication order disallowed the cenvat credit, imposing a penalty. In appeal, the penalty was set aside, but the disallowance of re-credit was upheld.

The appellant argued that re-credit upon realizing the initial reversal mistake is permissible under the statute, without unjust enrichment. Referring to judicial precedents, including a judgment of the Hon'ble Madras High Court and a decision of the Larger Bench of Tribunal, the appellant contended that since the excisable goods manufactured from job worked goods had already incurred Central Excise duty, Rule 6's embargo should not apply to availing re-credit.

On the other hand, the Respondent, relying on a decision of the Larger Bench of the Tribunal in another case, maintained that suo moto credit was impermissible for the appellant. The Tribunal examined the contentions of both parties and the records. It noted that the reversal and re-credit of cenvat credit were merely book entries, supported by documentary evidence. The Tribunal found that the job worked goods used by the principal manufacturer for excisable goods had already discharged Central Excise duty liability, rendering Rule 6 inapplicable. Referring to precedents, the Tribunal highlighted that the provisions of Rule 6 did not extend to job worked goods utilized for further manufacturing, cleared with duty payment by the principal manufacturer. Citing the Hon'ble Madras High Court's judgment, the Tribunal emphasized that taking suo moto credit was permissible as a book entry, without the need for a refund application under the Central Excise Act, 1944.

Consequently, the Tribunal found no merit in the impugned order, setting it aside and allowing the appeal in favor of the appellant. The decision was pronounced in open court, granting relief to the appellant regarding the re-credit of cenvat credit on furnace oil used for job worked goods.