2013 (4) TMI 302 - HC - Central Excise

Cenvat Credit - Job work - It was the case of the Department that the inputs were not sent for job work. The parties to whom they were sent had paid duty on the manufacture which should have been reversed by the appellant. On the other hand it was the submission of the assessee that no revenue loss had actually occurred. The job worker added some additional material and paid duty again which was already paid by the appellant and therefore the appellant had no alternative but to take credit of the same in the books of account else it would have resulted in excess payment. According to the assessee the credit taken was nothing but in respect of what was actually paid. Held that In the case of Division Bench of this Court of Commissioner of Central Excise vs. M/s. Rohan Dyes and Intermediates Limited 2007 (3) TMI 651 - CESTAT AHMEDABAD and Apex Court in M/s. International Auto Ltd. v. Commissioner of Central Excise Bihar 2010 (1) TMI 151 - SUPREME COURT OF INDIA If we apply the aforesaid principle to the facts of the present case there is no dispute that according to the modvat scheme it is the modvat of such final product which would have to include the cost of the inputs and in respect of which modvat credit could be taken at the time of clearance of the final product and thus in the facts of the present case the Tribunal rightly rejected the contention of the Revenue that the respondents should have reversed the cenvat credit taken before sending the goods to the job worker since the job worker had not followed the procedure of job work. Decision against the Department.

Summary

Issues:
- Interpretation of Cenvat Credit Rules, 2004
- Application of Rule 4(5)(a) of the Cenvat Credit Rules
- Determination of whether Rule 3(4)(b) read with Rule 3(5) of the Cenvat Credit Rules stands attracted

Analysis:

Interpretation of Cenvat Credit Rules, 2004:
The case involved a dispute regarding the utilization of CENVAT credit by an assessee engaged in the manufacture of dyes and dyes intermediates. The central issue was whether the appellant correctly availed CENVAT credit on inputs used in the manufacturing process. The Department contended that the appellant did not send the imported materials for job work but had effected sales, leading to the utilization of CENVAT credit not available to them. On the other hand, the assessee argued that no revenue loss occurred as they imported the material, paid duty on it, and cleared it for job work, as permitted under Rule 4(5) of the Cenvat Credit Rules, 2004. The Tribunal analyzed the facts and legal provisions to determine the correct application of the CENVAT credit rules in this scenario.

Application of Rule 4(5)(a) of the Cenvat Credit Rules:
The Tribunal's decision hinged on the interpretation of Rule 4(5)(a) of the Cenvat Credit Rules, 2004, which allows for the utilization of CENVAT credit even if inputs are sent to a job worker for further processing or for the manufacture of intermediate goods necessary for the final products. The Tribunal referred to a Supreme Court decision in M/s. International Auto Ltd. v. Commissioner of Central Excise, Bihar, which clarified the scheme of Modvat and the entitlement of manufacturers to adjust credits on inputs supplied to intermediate purchasers. The Tribunal's reliance on this precedent was crucial in determining the validity of the appellant's utilization of CENVAT credit in the present case.

Determination of whether Rule 3(4)(b) read with Rule 3(5) of the Cenvat Credit Rules stands attracted:
The Tribunal's analysis also delved into the interplay between Rule 3(4)(b) and Rule 3(5) of the Cenvat Credit Rules, which govern the utilization of CENVAT credit on inputs removed for further processing or job work. The Tribunal's decision highlighted the importance of correctly applying these rules to ensure compliance with the CENVAT credit scheme. Furthermore, the Division Bench's decision in Commissioner of Central Excise vs. M/s. Rohan Dyes and Intermediates Limited provided additional clarity on the interpretation of these rules, reinforcing the Tribunal's findings in the present case.

In conclusion, the Tribunal dismissed the appeal based on the principles established in previous judgments and the correct application of the CENVAT credit rules. The decision reaffirmed the importance of adhering to the statutory provisions and judicial precedents in matters concerning the utilization of CENVAT credit in manufacturing processes.