2014 (7) TMI 616 - AT - Central Excise

CENVAT credit - inputs were being sent to job worker - job worker was paying duty on the final product, which was being cleared by them on behalf of the respondents, by raising the invoice on their account - Revenue contends that the respondents were not entitled to the CENVAT credit of duty paid on the inputs, in as much they have not paid the duty themselves on the final product manufactured by the job worker - Commissioner set aside demand - Held that - as much as the duty on the final product stands paid by the job worker, the respondents are entitled to avail the CENVAT credit of duty paid on the inputs so supplied by them to the job worker. The fact that the assessee himself has not discharged the duty liability would not result in denial of credit. Movement of inputs to the job worker was with the permission of the Commissioner and the said fact of availment of credit was duly reflected by the assessee in their statutory records. In such a scenario, no suppression can be attributed to the respondents and extended period of limitation was not available to the Revenue. If the goods manufactured at the job worker s end were returned to the assessee and then cleared by them on payment of duty, they were admittedly entitled to availment of CENVAT credit duty paid on the inputs. As per the respondents, when the duty was paid by the job worker, the same stands re-imbursed by them. As such, it has to be observed that the duty is deemed to have been paid by the manufacturer, through the job worker and the Revenue has received the entire duty element due to them. In such a case, denial of credit to the respondents would not be justified. - Decided against Revenue.

Summary

Issues:
1. Entitlement to CENVAT credit on inputs sent to job worker.
2. Denial of credit due to duty payment by job worker.
3. Imposition of penalties and limitation period.
4. Revenue's appeal against Commissioner (Appeals) order.

Analysis:
1. The case involves a dispute over the entitlement of the respondent to avail CENVAT credit on inputs supplied to a job worker. The Revenue contended that since the duty on the final product was paid by the job worker, the respondent was not entitled to the credit. The original adjudicating authority confirmed this view, leading to an appeal by the Revenue.

2. The Commissioner (Appeals) set aside the duty confirmation and penalties, emphasizing that the duty payment by the job worker did not bar the respondent from claiming the CENVAT credit. The Commissioner noted that the movement of inputs to the job worker was authorized, and the credit availed was duly recorded in the statutory records, indicating no suppression by the respondent.

3. The Commissioner further highlighted that if the final products, after processing by the job worker, were returned to the respondent and cleared after duty payment, the respondent could rightfully avail the credit. The duty payment by the job worker, reimbursed by the respondent, was deemed as payment by the manufacturer, ensuring the Revenue received the full duty amount.

4. The appellate authority upheld the Commissioner's findings, emphasizing that no suppression could be attributed to the respondent due to the proper recording of credit in statutory records. Consequently, the demand raised beyond the limitation period was deemed invalid. The Tribunal rejected the Revenue's appeal, affirming the Commissioner's decision.

This judgment clarifies the entitlement to CENVAT credit in scenarios involving job workers and the implications of duty payment by them on the credit availed by the principal manufacturer. It underscores the importance of proper documentation and compliance with statutory requirements to support credit claims and highlights the limitations on the Revenue's ability to demand duty payments beyond the prescribed period.