2011 (4) TMI 232 - AT - Central Excise

Demand - Notification No. 214/86-CE, dt.25.3.86 - in the case of Sterlite Industries, laying down that MODVAT Credit is available in respect of the inputs used in the manufacture of final product cleared without payment of duty under job work - Appeal is allowed

Summary

Issues:
- Availment of CENVAT Credit on capital goods used in job work
- Denial of CENVAT Credit by lower authorities
- Applicability of Larger Bench decisions on the issue
- Commissioner(Appeals) reliance on conflicting judgments

Analysis:
1. The case involved the appellant receiving inputs from their parent unit for job work and availing CENVAT Credit on capital goods used in the process. The authorities issued a Show Cause Notice proposing recovery of Central Excise Duty, disallowance of credit, penalty imposition, and interest recovery.

2. The Assistant Commissioner adjudicated the matter, disallowing the credit, imposing penalties, and ordering interest recovery. The appeal before the Commissioner(Appeals) was unsuccessful, leading to the present appeal before the Tribunal.

3. The Tribunal considered the appellant's reliance on the Larger Bench decision in Sanshu Industries case, emphasizing that credit cannot be denied based on the initial use of capital goods in exempted goods manufacturing. The Commissioner(Appeals) cited conflicting judgments, including Sterlite Industries case, and upheld the duty demand.

4. The Tribunal found the issue squarely covered by the Larger Bench decision in Sterlite Industries, stating that MODVAT Credit is available for inputs used in final product manufacturing under job work without duty payment. The Commissioner(Appeals) was obligated to follow the Larger Bench ruling.

5. It was noted that the Commissioner(Appeals) referring to other judgments not directly addressing the issue was improper and could disadvantage litigants. The purpose of Larger Bench decisions is to settle the law, which must be followed by lower authorities unless overturned by a higher forum.

6. Given the issue's coverage by the Larger Bench judgment, the Tribunal set aside the impugned order, allowing the appeal with consequential relief. The decision emphasized the binding nature of Larger Bench rulings on lower authorities unless overruled by a higher appellate body.