2007 (8) TMI 114 - AT - Central Excise

Cenvat/Modvat - Appellant is a job worker demand for credit of duty paid at the time of clearance of auto parts to principal manufacture but revenue disallowed the credit on the basis that the auto parts were exempted goods - Tribunal allowed the credit to appellants

Summary

Issues:
1. Denial of capital goods credit for auto components cleared on payment of duty instead of under Notification No. 214/86-CE.
2. Applicability of Rule 57R(1) on Modvat credit for capital goods used for exempted final products.
3. Interpretation of job workers' rights under Rule 57F(4) and Notification No. 214/86-CE.

Analysis:
1. The appeal challenged the denial of capital goods credit to the appellants for auto components cleared on payment of duty under Rule 52A invoice instead of under Notification No. 214/86-CE. The authorities contended that the auto parts were exempt from excise duty under the notification, thus disallowing the credit. However, the appellants argued that they had the option to clear products on payment of duty and were eligible for capital goods credit in such cases. Reference was made to a Tribunal decision affirming job workers' rights to return processed goods on payment of duty, supporting the appellants' case.

2. The Tribunal considered the case of Bright Steel Mac Fabrics, where a job worker returned processed goods on payment of duty after availing SSI benefit under a notification, despite the department's insistence on following a different procedure. The Tribunal held that the job worker could not be compelled to adhere to the department's procedure, which was upheld by the Supreme Court. Drawing parallels, the Tribunal found a valid challenge in the present appeal against the denial of capital goods credit, ultimately setting aside the impugned order and allowing the appeal.

3. The decision in Bright Steel Mac Fabrics supported the appellants' case, emphasizing the job workers' rights in returning processed goods on payment of duty. In light of this precedent, the Tribunal ruled in favor of the appellants, highlighting their freedom to choose the clearance procedure and avail capital goods credit accordingly. The impugned order was overturned, and the appeal was allowed, granting relief to the appellants.