2013 (7) TMI 5 - AT - Central Excise

Input credit denied - allegation of appellant using furnace oil as fuel for manufacturing of dutiable goods as well as job work goods & not maintaining separate account of fuel consumed in the manufacture of dutiable goods and job work goods - Held that - As appellant are manufacturers of excisable goods as well as they are undertaking job work of excisable goods. Rule 6(2) applies where assessee is not maintaining separate account of input/input service for manufacturing dutiable as well as exempted goods. In this case appellant are not manufacturing any exempted goods. The understanding by lower authorities that job work goods are exempted goods are not sustainable and they have misinterpreted the law. As decided in Sterlite Industries Ltd. V CCE (2004 (12) TMI 108 - CESTAT, MUMBAI) input credit of duty paid on inputs used in the manufacture of final product cleared without payment of duty that manufacture of final product which are cleared by the principal manufacturer are not hit by the provision of Section 57C of Central Excise Rules, 1944. Also in the case of CCE V. J. H. Kharawala P. Ltd. (2008 (7) TMI 287 - CESTAT, AHMEDABAD) held that goods manufactured on job work basis and cleared without payment of duty cannot be considered as exempted goods since principal manufacturer has to pay duty on the same. In favour of assessee.

Summary

Issues:
1. Denial of input credit on the use of furnace oil for manufacturing dutiable goods and job work goods.
2. Requirement of maintaining separate accounts for dutiable and exempted goods under Rule 6(2) of Cenvat Credit Rules, 2004.
3. Interpretation of job work goods as exempted goods by lower authorities.
4. Applicability of input credit rules to manufacturers of excisable goods and job work goods.
5. Pre-deposit requirement waiver for final disposal of the appeal.

Analysis:
The judgment deals with an appeal regarding the denial of input credit on the use of furnace oil for manufacturing dutiable goods and job work goods. The lower authorities had held that the appellant was not entitled to input credit as they did not maintain separate accounts for fuel consumed in the manufacture of dutiable and job work goods, as required by Rule 6(2) of the Cenvat Credit Rules, 2004. The Tribunal noted that the appellant was not manufacturing any exempted goods, contrary to the lower authorities' understanding that job work goods were exempted. Citing precedents like Sterlite Industries Ltd. and CCE v. J. H. Kharawala P. Ltd., the Tribunal clarified that goods manufactured on a job work basis and cleared without payment of duty should not be considered exempted goods, as the principal manufacturer is liable to pay duty on them.

The Tribunal waived the pre-deposit requirement due to the issue's narrow scope and took up the appeal for final disposal. It emphasized that Rule 6(2) applies when an assessee does not maintain separate accounts for input/service used in manufacturing dutiable and exempted goods, which was not the case here. Relying on the cited decisions, the Tribunal concluded that the appellant was indeed entitled to input credit for furnace oil. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief deemed necessary.

In conclusion, the judgment clarifies the applicability of input credit rules to manufacturers of excisable goods and job work goods, emphasizing the importance of correctly interpreting the classification of goods for determining eligibility for input credit. The decision highlights the significance of maintaining accurate records and understanding the legal provisions to ensure compliance with the relevant regulations.