2014 (8) TMI 285 - AT - Central Excise

Waiver of pre deposit - CENVAT Credit - Notification No. 214/86 - Appellant took credit of duty paid on the raw material i.e. MS Rounds, MS Tubes, Pipes, MS Bars/Rods and sent them to the job workers for carrying out the process of cutting, straightening, threading, forging and trimming for manufacture of threading rods, Ledger Blade and Jack Nuts etc. - ground for disallowing the Cenvat credit of duty paid on the raw material sent by the Appellant to job workers is that the processes carried out by the Appellant do not amount to manufacture - Held that - assessee was paying duty on the final product cleared by them. The show cause notice or the Order- in-Original doesn t question the applicability of exemption notification no. 214/86-CE in respect of the job workers. If the contention of the adjudicating authority that the Appellant themselves did not carry out any processes amounting to manufacture (and hence no Cenvat credit can be allowed to them on the raw material) then the Appellant would not be liable to pay duty either. Nowhere this notification stipulates that the principal manufacturer must carry out some operations amounting to manufacture. It is also a fact that the job worker works on behalf of the principal manufacturer. It is also not disputed that the final product emerged as a result of subjecting the raw material to processes amounting to manufacturer and the appellant paid duty on the final product. Thus prima facie, there is nothing which would make the impugned Cenvat Credit inadmissible to the Appellant - prima facie the Appellant has a strong case and balance of convenience also clearly lies is its favour - Stay granted.

Summary

Issues involved:
1. Disallowance of Cenvat credits under Rule 14 of Cenvat Credit Rules 2004.
2. Imposition of penalty under Rule 15 of Cenvat Credit Rules.
3. Whether the processes carried out by the Appellant amount to manufacture.
4. Applicability of exemption notification No. 214/86-CE to job workers and its impact on Cenvat credits.

Detailed Analysis:
1. The Appellant filed an appeal against the order disallowing Cenvat credits of Rs. 6225956 under Rule 14 of Cenvat Credit Rules 2004. The Commissioner upheld the disallowance stating that the processes carried out by the Appellant did not amount to manufacture, leading to a suppression of material facts. The Appellant argued that the final product resulted from processes amounting to manufacture, citing relevant case laws supporting their claim.

2. In addition to disallowing Cenvat credits, a penalty was imposed on the Appellant under Rule 15 of Cenvat Credit Rules. The Appellant contended that they had paid duty on the final product and that the penalty was unjustified, emphasizing that no suppression or willful misstatement occurred.

3. The main contention revolved around whether the processes undertaken by the Appellant constituted manufacturing activities. The Appellant argued that the processes, such as converting raw materials into threaded rods, amounted to manufacture, supported by judicial precedents like CCE vs. Rana NHK Steering and Brakes India Ltd. The Tribunal noted that the Appellant paid duty on the final product, which raised doubts about the Commissioner's assertion that no manufacturing processes occurred.

4. The applicability of exemption notification No. 214/86-CE to job workers was crucial in determining the eligibility of Cenvat credits. The notification exempted specified goods used in or in relation to the manufacture of final products from excise duty. The Tribunal found that the job worker processed raw materials on behalf of the principal manufacturer, leading to the emergence of the final product. This, coupled with the Appellant's duty payment on the final product, supported the admissibility of Cenvat credits.

In conclusion, the Tribunal allowed the Appellant's stay petition, highlighting a strong case in their favor based on the absence of manufacturing suppression and the applicability of the exemption notification to job workers.