2014 (8) TMI 85 - AT - Central Excise

Cenvat Credit - goods (moulds/dies) removed for Job work - whether the vendor is a job-worker or not? - procedure prescribed under Rule 4(5)(a) of cenvat credit rules - Held that - As per the definition under Rule 2(n) it is clear that the vendor who procured the raw material himself is not a job-worker as defined in law and prior to 27/02/2010, there was no specific provision for sending the moulds and dies to another manufacturer. Therefore, the procedure of sending moulds and dies to a vendor who is not a job-worker was not envisaged under the CENVAT Credit Rules. However, the question remains whether the appellant should be denied benefit of CENVAT credit if he was also utilizing these moulds and dies in his factory for manufacture of excisable goods. From the show-cause notice and from the impugned order, this issue appears not to have been examined by the adjudicating authority. If the appellant was also utilizing the same moulds and dies, which was also occasionally sent to the vendors, the appellant could not have been denied the benefit of CENVAT Credit. In such a situation, the only infraction the appellant could be attributed is only procedural infraction which only merits imposition of penalty rather than denial of credit, as provided for in the law. - Matter remanded back - Decided in favor of assesee.

Summary

Issues:
1. Disallowance of CENVAT credit and imposition of penalty.
2. Interpretation of Rule 4(5)(a) and Rule 4(5)(b) procedures.
3. Definition of 'job-worker' under CENVAT Credit Rules.
4. Denial of CENVAT credit for sending moulds and dies to a vendor.
5. Examination of whether appellant used the moulds and dies in their own factory.

Analysis:

1. The appeal challenged the Order-in-Original disallowing CENVAT credit of Rs. 2,76,35,315/- to the appellant and imposing penalties. The denial was based on the appellant clearing moulds, dies, etc., to vendors under Rule 4(5)(a) procedure, which was not permitted at the relevant time. The appellant contended that the goods were cleared under Rule 4(5)(b) and the mentioning of Rule 4(5)(a) was a mistake. They argued that the rules were subsequently amended to allow sending of moulds and dies to another manufacturer for production, and cited precedents supporting their position.

2. The appellant's counsel argued that Rule 4(5)(b) allowed clearance of moulds and dies to job-workers for production on behalf of the principal manufacturer. The amendment post the relevant period permitted sending such items to another manufacturer for production. The Tribunal noted that the issue was whether the vendor qualified as a job-worker. The absence of examination on whether the appellant used the moulds and dies in their factory for manufacturing excisable goods was highlighted.

3. The Revenue contended that the vendor did not meet the definition of a job-worker as per Rule 2(n) of the CENVAT Credit Rules since they procured raw materials independently. They argued that without a provision for sending moulds and dies to vendors without reversing credit, the demand was valid. The Tribunal observed the lack of findings on whether the appellant utilized the moulds and dies in their factory for manufacturing excisable goods.

4. The Tribunal held that the vendor, who procured raw materials independently, did not qualify as a job-worker as defined. Prior to the amendment, sending moulds and dies to a vendor not meeting the job-worker criteria was not envisaged under the rules. The matter was remanded to the adjudicating authority for further examination, emphasizing the need to consider evidence of the appellant using the moulds and dies in their factory for manufacturing excisable goods.

5. The Tribunal allowed the appeal by way of remand, directing the adjudicating authority to reconsider the issue in light of the appellant's potential use of the moulds and dies in their factory for manufacturing excisable goods. The appellant was granted the opportunity to present evidence supporting their claim, with a fresh order to be passed accordingly.

This comprehensive analysis of the judgment provides a detailed breakdown of the issues involved and the Tribunal's reasoning, ensuring a thorough understanding of the legal complexities addressed in the case.