2012 (12) TMI 934 - AT - Central Excise

Denial of CENVAT Credit - Revenue contends that appellant is a job worker and not paying duty at the time of clearance of their finished goods, therefore, they are not entitled for input credit on the procured inputs for the job work activity - Held that - It has been clearly stated by the appellant that once the processed goods were cleared by the appellant to the manufacturer after following the procedure under Rule 4(5)(a) of CENVAT Credit Rules, 2004, the principal manufacturer carried out certain process on the job work goods and the same were cleared on payment of duty. This fact has not been controverted by the Revenue in the impugned orders. No enquiry has been made to principal manufacturer whether principal manufacturer has discharged the duty liability or not. Therefore, the impugned order is not sustainable and the same is set aside and the matter is remanded back to the adjudicating authority - If principal manufacturer has discharged the duty liability then the appellant is entitled for CENVAT credit - Decided in favour of assessee.

Summary

Issues:
- Appellant's entitlement to CENVAT credit on inputs used in job work activity without payment of Central Excise duty.
- Failure to show whether principal manufacturer discharged duty liability on final goods received after job work.

Analysis:

1. Entitlement to CENVAT Credit:
The appellant, a jobworker and manufacturer of excisable goods, followed Rule 4(5)(a) of CENVAT Credit Rules, 2004 for job work activity involving processing Copper Wire and Kraft Paper. The appellant cleared goods to their principal manufacturer without paying Central Excise duty on waste and scrap generated during job work. The appellant claimed CENVAT credit on inputs used in job work, arguing that being a job worker not paying duty on finished goods, they were not entitled to input credit. A show-cause notice demanded duty on inputs used, which was adjudicated confirming duty demand, interest, and penalty under Section 11AC of Central Excise Act, 1944. The appellant appealed against this order.

2. Failure to Show Duty Discharge by Principal Manufacturer:
During the appeal, the appellant did not appear, and the Revenue argued that duty demand was justified as the appellant failed to prove if the principal manufacturer discharged duty liability on final goods received after job work. However, the appellant's reply to the show-cause notice indicated that the principal manufacturer processed goods further and cleared them after paying duty. The Revenue did not challenge this fact or verify with the principal manufacturer. The tribunal found this lack of verification unsustainable and remanded the matter to the adjudicating authority to confirm if the principal manufacturer indeed discharged duty liability. If confirmed, the appellant would be entitled to CENVAT credit.

In conclusion, the tribunal set aside the impugned order, remanding the matter for verification regarding duty discharge by the principal manufacturer. The appeal was allowed by way of remand, emphasizing the need to ascertain the principal manufacturer's duty liability discharge to determine the appellant's entitlement to CENVAT credit on inputs used in job work activity.