2010 (8) TMI 494 - AT - Central Excise

Cenvat Credit - Inputs used by the job worker - The Commissioner (Appeals) in his order himself is found merit in the arguments of the appellant that the case of the appellant is covered by the Sterlite Industries (I) Ltd. v. CCE, Pune, wherein this Tribunal has held that the Cenvat credit on input used for carrying out job work cannot be denied on the ground that the final products were exempted from payment of duty under job work Notification No. 214/86-C.E - The same has been confirmed by the Hon ble High Court of Bombay but the Commissioner (Appeals) has not paid any respect to the decision of this Tribunal and has gone beyond the scope of the show cause notice which is not permissible to him - Hence, do not find any merit in the impugned order, the same is rejected and the appeal is allowed in favour of assessee.

Summary

Issues:
Appeal against denial of Cenvat Credit on inputs used by job worker in processing goods cleared without duty payment.

Analysis:

1. Background and Scheme Changes:
The appellant, engaged in embroidery manufacturing, faced changes in the Central Excise duty scheme. Initially under compounded levy, they later transitioned to ad valorem basis duty payment. Subsequently, embroidery was exempted from duty payment during a specific period.

2. Cenvat Credit Availed:
The appellant availed Cenvat credit on duty paid for various types of cloth and yarn received for embroidery. They also claimed transitional credit related to stocks available on a specific date.

3. Utilization of Yarn and Exempted Activities:
It was observed that the appellant used yarn for both duty-paid embroidery and exempted activities. Despite the exemption granted, the appellant did not reverse the credit related to the yarn used for the exempted process.

4. Show Cause Notice and Allegations:
A notice was issued to reverse the Cenvat credit on stocks of cloth and yarn used for exempted activities. Allegations included non-payment of equivalent credit amount for yarn used in the exempted process, violating Rule 6(3) of Cenvat Credit Rules.

5. Judicial Precedents and Arguments:
The appellant relied on a precedent regarding Cenvat credit on inputs used for final products cleared without duty payment by a job worker. They also highlighted the importance of judicial discipline in following higher appellate authorities' decisions.

6. Appellate Tribunal Decision:
After examining submissions, the Tribunal found merit in the appellant's arguments, citing precedents that supported the appellant's position. The Tribunal criticized the lower authority for not respecting the Tribunal's decision and exceeding the show cause notice's scope. Consequently, the Tribunal rejected the lower order and allowed the appeal, emphasizing the importance of following appellate decisions for judicial discipline and consistency in tax administration.