2012 (9) TMI 856 - AT - Central Excise

Waiver of pre deposit - Availment of CENVAT Credit - Inputs were sent by the appellants directly to the job worker s premises without bringing the same first to their factory - Held that - inputs, in question, were directly sent by the appellant to the job worker without first receiving the same in their factory. Rule 3(1) permits availment of credit by a manufacturer even if inputs, in respect of which credit had been availed, had been sent to the job worker for processing. In this case, we find there is no allegation of the department that the inputs received by the job worker, instead of being used for intended purpose, had been illicitly diverted. On perusal of Rule 4(6), we are of the prima facie view, that for availment of the facility to clear the finished goods from the job worker s premises, it is not necessary that the inputs must be sent by the manufacturer from his factory - Prima facie case in favour of assessee - Stay granted.

Issues:
1. Eligibility of Cenvat credit for inputs sent directly to job worker's premises.
2. Interpretation of Rule 4(6) of Cenvat Credit Rules, 2004.
3. Allegations of illicit diversion of inputs by job worker.
4. Requirement of pre-deposit for Cenvat credit demand, interest, and penalty.

Analysis:

1. Eligibility of Cenvat credit for inputs sent directly to job worker's premises:
The appellant, a manufacturer of insecticides, sought Cenvat credit for excise duty on inputs and capital goods used in manufacturing final products. The inputs were sent directly to the job worker's premises for processing, and the finished goods were sold without being brought back to the factory. The Commissioner denied the Cenvat credit, leading to an appeal. The appellant argued that Rule 3(1) allows credit even if inputs are processed by a job worker, and there was no allegation of illicit diversion. The Tribunal found that the appellant had a prima facie case, as Rule 4(6) does not mandate receiving inputs in the factory for clearing finished goods from the job worker's premises. Consequently, the requirement of pre-deposit was waived, and recovery stayed pending appeal.

2. Interpretation of Rule 4(6) of Cenvat Credit Rules, 2004:
The key contention revolved around Rule 4(6) which governs the permission to clear finished goods from the job worker's premises. The department argued that since the inputs were not received in the factory, Cenvat credit was ineligible. However, the Tribunal's interpretation emphasized that the rule does not explicitly require inputs to be sent from the factory to the job worker. This interpretation favored the appellant's case for availing Cenvat credit.

3. Allegations of illicit diversion of inputs by job worker:
The Tribunal noted that there were no allegations of the inputs being illicitly diverted by the job worker. This absence of diversion allegations strengthened the appellant's position in claiming the Cenvat credit for inputs sent directly to the job worker's premises. The focus remained on the compliance with the conditions under which permission was granted for clearing finished goods.

4. Requirement of pre-deposit for Cenvat credit demand, interest, and penalty:
The appellant sought a waiver of the pre-deposit requirement for the Cenvat credit demand, interest, and penalty during the appeal process. The Tribunal, considering the prima facie case in favor of the appellant and the absence of diversion allegations, granted the waiver and stayed the recovery pending the appeal's disposal. This decision reflected a balanced approach in addressing the financial implications on the appellant during the legal proceedings.

In conclusion, the Tribunal's judgment favored the appellant's eligibility for Cenvat credit on inputs sent directly to the job worker's premises, highlighting the importance of rule interpretation, compliance with permission conditions, and absence of diversion allegations in determining the applicability of Cenvat credit provisions.

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