2015 (4) TMI 1228 - AT - Central Excise

CENVAT credit - inputs not received and sent directly to job-worker - Held that - when the final product of the appellant was decided to be manufactured on job work basis by the job worker, the input need not come to the factory of the appellant and in any case it has to be supplied to the job worker - the appellant is legally entitled for the CENVAT credit. The movement of input for job work is governed by Rule 4(5)(a) of the Cenvat Credit Rules, 2002. Under this provision, no statutory procedure was prescribed. As regards direct supply of input from the supplier to the job worker, this Tribunal in various judgments held that even if the input is supplied directly from supplier to the job worker, the Cenvat credit cannot be denied. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Disallowance of Cenvat credit for inputs not received in the appellant's factory.
2. Enhancement of penalty under Section 11AC by the Revenue.

Analysis:
1. The appeal concerned the disallowance of Cenvat credit by the Commissioner of Central Excise (Appeals) for inputs, beams, and angles not physically received in the factory premises but used outside for production, with the final products being exported. The appellant contended that the inputs were sent to a job worker for manufacturing the final product, which was owned by the appellant and subsequently exported. The appellant argued that the procedural formalities were duly followed, including issuing challans to the job worker and providing necessary documentation for export. The appellant's representative emphasized that even if minor procedural lapses existed, the Cenvat credit should not be disallowed as the inputs were purchased by the appellant and used in the manufacturing process. The Tribunal agreed with the appellant, citing Rule 4(5)(a) of the Cenvat Credit Rules, 2002, and previous judgments allowing Cenvat credit in similar situations where inputs were sent directly to job workers. The Tribunal held that the appellant was legally entitled to the Cenvat credit, setting aside the Commissioner's decision and allowing the appeal.

2. The Revenue had also filed an appeal seeking to enhance the penalty from Rs. 21,400 to the equal amount of duty, i.e., Rs. 85,599 under Section 11AC. The Revenue argued that since the inputs were not physically received in the appellant's factory, the Cenvat credit should not be allowed, and thus, the penalty should be increased. However, the Tribunal's analysis and decision in favor of allowing the Cenvat credit rendered the Revenue's appeal for penalty enhancement moot. The Tribunal found that the Commissioner's decision to enhance the penalty was not sustainable based on the legal position and precedents. Consequently, the Tribunal set aside the impugned order and allowed the appellant's appeal, thereby rejecting the Revenue's appeal for penalty enhancement.

This detailed analysis of the judgment highlights the key arguments presented by both parties, the legal provisions invoked, and the Tribunal's reasoning leading to the decision to allow the Cenvat credit and reject the penalty enhancement sought by the Revenue.