2013 (5) TMI 213 - AT - Central Excise

Cenvat credit on Nylon Granules sent to job workers for making bobbins denied - allegation of the Department that no permission of Asstt. Commissioner was obtained for sending cenvated inputs to job workers, that no account of the materials sent for job work and its return was maintained and the bobbins made out of the Nylon Granules had infact not been received back within 180 days - assessee contested that they had been maintaining the records of the Nylon Granules being received by them in respect of which cenvat credit had been availed and record of sending the same to job workers for making bobbins and that the Nylon Granules sent to the job worker had been returned back under the job work challans - Held that - On-going through the impugned order, no finding has been given either by the Asstt. Commissioner or by the Commissioner (Appeals) on this point, though precisely for making a finding on this point, that this matter had earlier been remanded. If the inputs had been sent under job work challans to the job workers for processing and the same had been returned back, even if after some delay, the cenvat credit would have to be allowed and as such, there was no provision for obtaining prior permission from the jurisdictional Commissioner for sending cenvated inputs for job work. Since on the crucial point of return of the inputs after processing, there is no finding the matter has to be sent back again to the original adjudicating authority for giving a clear finding as to whether appellant had maintained account for the receipt and utilization of the Nylon Granules in their RG-23, Part-I and Part-II Account, whether the cenvat credit availed Nylon Granules had been sent to the job workers under job work challans and whether the Nylon Granules sent to the job worker had been received back by the appellant, even if, after 180 days.

Summary

Issues:
1. Availment of cenvat credit on inputs sent to job workers for processing.
2. Requirement of permission from jurisdictional Asstt. Commissioner for sending cenvated inputs.
3. Maintaining records of materials sent for job work and their return within 180 days.
4. Adjudication process and imposition of penalty under Cenvat Credit Rules, 2004.

Analysis:

Issue 1: The appellant, a manufacturer of SMP Transformers, availed cenvat credit of central excise duty on inputs, including Nylon Granules sent to job workers for making bobbins. The dispute arose as the Department alleged that no permission was obtained for sending the inputs to job workers and that the bobbins made were not returned within 180 days. The Asstt. Commissioner confirmed the demand for cenvat credit, interest, and imposed a penalty. The matter was remanded to examine whether the bobbins made were used in goods cleared on duty payment.

Issue 2: The appellant argued that no permission was required from the jurisdictional Asstt. Commissioner for sending inputs for job work processing during the disputed period. The rules allowed sending inputs for further processing without prior permission, subject to return within 180 days. The lack of permission was not a basis for denying cenvat credit if the inputs were returned.

Issue 3: The Department contended that since the appellant did not maintain records of inputs sent for job work, it couldn't be verified if the processed inputs were returned. The absence of proper records hindered the verification of whether the bobbins made from Nylon Granules were received back within the stipulated time.

Issue 4: The Tribunal observed that there was no requirement for prior permission to send cenvated inputs for job work during the disputed period. However, the lack of findings by the adjudicating authorities on whether the inputs were returned after processing necessitated remanding the matter for a clear determination on maintaining records, sending inputs under job work challans, and receiving the processed inputs back.

In conclusion, the Tribunal set aside the impugned order and remanded the matter to the original adjudicating authority for a detailed examination of the appellant's compliance with maintaining records and the return of Nylon Granules sent for job work processing. The appeal was disposed of with directions for a thorough review of the relevant aspects to determine the eligibility of cenvat credit on the inputs sent to job workers.