2012 (1) TMI 106 - AT - Central Excise

Duty demand - Recovery of the credit in under Rule 14 of the CENVAT Credit Rules, 2004 read with the proviso to Section 11A(1) of the Central Excise Act - Bar of limitation - Held that - Rule 3(5) provides that inputs or capital goods, on which CENVAT credit has been taken, can be removed as such from the factory of the manufacturer of the final products on payment of an amount equal to the credit availed thereon. Such removal is required to be made under an invoice referred to in Rule 9 of the Central Excise Rules, 2002. If these provisions are carefully perused, it would become clear that the removal of goods envisaged is a removal for good just like the removal of an excisable final product. A case of removal of input or capital goods to a job worker for further processing, testing, repair, re-conditioning or any other purpose is governed by Rule 4(5)(a) of the CENVAT Credit Rules, 2004. If the job-worked goods are not received back in the factory of the manufacturer of final product within such period, the manufacturer of final product shall pay an amount equivalent to the CENVAT credit attributable to the input or capital goods, by debiting the amount in the CENVAT account or otherwise. Rule 4(5)(a) allows CENVAT credit on the input to be taken by the manufacturer of final product before removal of the input to the job worker. It was this right which was exercised by the present appellant and the same is not assailable - manufacturer of final product is entitled not only to avail credit on the input supplied to their job worker but also to take credit of the duty paid on the intermediate product by the job worker - Following decision of VENLON POLYESTER FILM LTD. Versus COMMR. OF C. EX., BANGALORE-III 2007 (9) TMI 354 - HIGH COURT OF KARNATAKA - Decided in favour of assessee.

Summary

Issues:
Challenge against demand of duty, interest, and penalty for availing CENVAT credit on raw materials supplied to job worker for manufacturing Oil Coolers.

Analysis:

1. The appellant contested the demand of duty, interest, and penalty imposed for availing CENVAT credit on raw materials supplied to a job worker. The dispute arose when the job worker cleared the job-worked goods to the appellant by including the value of raw materials in the assessable value, and the appellant availed CENVAT credit on the duty paid by the job worker. The show-cause notice was issued based on an Audit Note highlighting the failure to reverse credit on the material supplied to the job worker.

2. The appellant argued against the demand of duty on both merit and limitation grounds, citing Rule 4(5)(a) of the CENVAT Credit Rules, 2004. Reference was made to judgments such as International Auto Ltd. v. Commissioner and Venlon Polyester Film Ltd. v. Commissioner to support the contention that the appellant was entitled to CENVAT credit on both raw materials and job-worked goods.

3. The appellant further contended that a revenue-neutral situation would have arisen if the CENVAT credit on tubes had been reversed at the time of clearance to the job worker, and the job worker had taken credit. The appellant cited case law like Goa Industrial Products v. Commissioner to support the argument for an unsustainable demand in such a scenario.

4. The appellant raised the issue of limitation, stating that the show-cause notice for recovery of credit was issued beyond the normal limitation period from the date of knowledge. Case law, including P.R. Rolling Mills Pvt. Ltd. v. Commissioner, was cited to challenge the demand on limitation grounds.

5. The Deputy Commissioner argued that the appellant availed double benefit by not reversing CENVAT credit on tubes and also availing credit on the duty paid by the job worker. The appellant contested this claim with reference to purchase orders and invoices available on record.

6. The Tribunal analyzed Rule 3(5) of the CENVAT Credit Rules, 2004, and highlighted the provisions governing the removal of goods to a job worker for further processing. It was noted that the appellant's right to take CENVAT credit on the input before removal to the job worker was valid, and the demand was not sustainable based on the department's approach.

7. The Tribunal referenced the Supreme Court's judgment in International Auto case, which supported the appellant's position on availing credit on both raw materials and job-worked goods. The decision in Venlon Polyester Film case further strengthened the appellant's case against the Revenue. Consequently, the Tribunal ruled in favor of the appellant on merits, without delving into the limitation aspect.

8. In conclusion, the impugned order was set aside, and the appeal was allowed in favor of the appellant based on the established merits of the case.

End of Analysis