2011 (2) TMI 152 - HC - Central Excise

Rule 6 of the Cenvat Credit Rules, 2001 & 2002 - Cenvat credit on inputs used by the job workers - The assessee availed cenvat credit on inputs i.e. lubricants , soaps, chemical etc. utilized in manufacture of their own goods as well as processing of goods on job work - Under the circular of the Board as well as the scheme or the Rules, cenvat credit is permissible to a job worker or even to a manufacturer at intermediate stage in respect of inputs like lubricants, soaps, chemical etc. On final products - As per the judgment of larger Bench in Sterlite Industries (I) Ltd. Vs. Commissioner of Central Excise, Pune 2005 -TMI - 54190 - CESTAT, WEST ZONAL BENCH, MUMBAI , decided in favour of assessee.

Summary

Issues:
1. Interpretation of Rule 6 of the Cenvat Credit Rules, 2001 & 2002 regarding availing credit on duty-free goods.
2. Correctness of allowing Cenvat Credit by the Tribunal based on previous decisions without considering specific rules.

Issue 1 - Interpretation of Rule 6 of the Cenvat Credit Rules:
The appeal was filed by the revenue under Section 35G of the Central Excise Act, 1944 against an order passed by the Tribunal. The appellant raised substantial questions of law regarding the interpretation of Rule 6 of the Cenvat Credit Rules, 2001 & 2002. The appellant questioned whether a unit could take credit of duty on inputs used in the manufacture of job worked goods cleared without payment of duty. The assessee, a manufacturer of wool tops and woolen yarn, availed Cenvat credit on inputs used in their own manufacturing and job work for other manufacturers. The Adjudicating Authority observed that amendments to the Rules allowed the benefit of Cenvat credit on inputs used by job workers. The Commissioner (Appeals) and the Tribunal upheld this view, citing relevant circulars and provisions. The Tribunal relied on a judgment by the Supreme Court, stating that clearing goods at an intermediate stage did not equate to clearing exempted goods without duty payment.

Issue 2 - Correctness of Allowing Cenvat Credit Based on Previous Decisions:
The appellant argued that allowing Cenvat credit at an intermediate stage would be akin to availing credit on exempted goods, which was impermissible. However, the Adjudicating Authority, Commissioner (Appeals), and the Tribunal maintained that clearing goods at an intermediate stage did not equate to clearing exempted goods without duty payment. They emphasized that Cenvat credit aims to prevent the cascading effect of duty. The Tribunal's decision was based on existing circulars, rules, and previous judgments, including one by the Supreme Court. The Court found no error in the Tribunal's interpretation and dismissed the appeal, stating that no substantial question of law arose.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing that availing Cenvat credit at an intermediate stage did not amount to availing credit on duty-free goods. The judgment highlighted the importance of preventing the cascading effect of duty and the distinction between clearing goods at different stages.