2013 (1) TMI 387 - AT - Central Excise

Denial of CENVAT Credit Non-payment of duty - Inputs for making packing materials have been sent to the job worker - Under Rule 4(5) of the CCR. 2004 - The goods manufactured by the job worker viz. the sacks have been returned to the assessee without payment of duty - Clearances have been permitted at the hands of the job worker by allowing the benefit of Notification No.214/86 Assessee have received the goods viz. sacks and utilized the same for packing their final product viz. sugar on which duty has been paid - Held that - Merely because they have not paid the duty on the sacks which were manufactured in the factory of the job worker, there is no justification for denial of credit on the inputs which have gone into the packing materials. In favour of assessee

Summary

Issues:
Department's appeal against Commissioner (Appeals) order denying credit on granules used for manufacturing sacks sent to job worker under CENVAT Credit Rules.

Analysis:
The Department appealed against the Commissioner (Appeals) order in a case involving the denial of credit on granules used for manufacturing sacks sent to a job worker under Rule 4(5) of the CENVAT Credit Rules (CCR). The respondents, sugar manufacturers, received duty-paid PP/LDPE granules and took credit for the duty paid on these materials. They sent the granules to the job worker for sack manufacturing without reversing the credit, and upon receiving the sacks back, used them for packing sugar. The Department alleged that duty was not paid on the sacks, claiming the benefit under Notification No.67/95 CE and non-fulfillment of conditions under Notification No.214/86-CE. The original authority denied the credit, but the Commissioner (Appeals) set aside this decision, leading to the Department's appeal.

The Department argued that the respondents did not fulfill the conditions of Notification No.214/86 as duty was not paid on the received sacks. The Additional Commissioner sought to set aside the Commissioner (Appeals) order and reinstate the original authority's decision. Conversely, the respondents' advocate supported the Commissioner (Appeals) order, emphasizing that any violation of Notification No.214/86 should result in a duty demand from the job worker, which did not occur. He contended that utilizing the granules in their factory for sack manufacturing should not lead to credit denial, citing relevant instructions treating packing materials as raw materials for the final product.

Upon review, the Tribunal found that the respondents sent the inputs for making packing materials to the job worker under CCR Rule 4(5), and the returned sacks were used for packing dutiable products with paid duty. The Tribunal noted that the denial of credit on inputs used for packing materials due to non-payment of duty on manufactured sacks lacked justification. It highlighted that the Commissioner (Appeals) decision was legally sound, leading to the rejection of the Department's appeal. The judgment favored the respondents, upholding the Commissioner (Appeals) ruling.

In conclusion, the Tribunal's detailed analysis considered the parties' arguments, the relevant notifications, and the utilization of inputs for manufacturing final products. The judgment emphasized the legal aspects surrounding credit denial and duty payment, ultimately supporting the Commissioner (Appeals) decision in favor of the respondents.