2015 (9) TMI 984 - AT - Central Excise

Denial of CENVAT Credit - Notification No. 214/86-CE dated 25/3/1986 - Job worker - Held that - Section2 (f) (i) even activity of completion of manufacture product is considered as manufacturer. Job workers admittedly engaged in the processing of component/parts which activity undoubtedly a manufacturing activity, accordingly the job worker is also a manufacturer. From Rule 2(n) also, it is clear that the manufacture takes place in the course of job work also therefore in the present case the job worker activity is manufacturing activity and the job work is also constitutes as manufacture. In view of this legal position the job worker being manufacturer, Cenvat credit was wrongly denied merely on the contention that the job worker is not the manufacturer. - Cenvat credit in respect of input services availed by the appellant during the course of job work manufacture in terms of Notification No. 214/86-CE is correctly admissible to them. Therefore both the lower authorities have gravely erred in disallowing the credit - impugned orders are set aside - Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the appellant, a job worker, qualifies as a manufacturer under the Central Excise Act, 1944 and Cenvat Credit Rules, 2004.
2. Whether the appellant is entitled to Cenvat Credit on input services used in the manufacture of goods on a job work basis under Notification No. 214/86-CE.

Issue-Wise Detailed Analysis:

1. Whether the appellant, a job worker, qualifies as a manufacturer under the Central Excise Act, 1944 and Cenvat Credit Rules, 2004:

The appellant, engaged in job work for another unit, was denied Cenvat Credit by the Revenue on the grounds that as a job worker, they are not considered a manufacturer under Notification No. 214/86-CE. The adjudicating authority and the Commissioner (Appeals) upheld this view, leading to the appellant's appeals.

The appellant argued that under Section 2(f) of the Central Excise Act, 1944, and Rule 2(n) of the Cenvat Credit Rules, 2004, a job worker engaged in processing activities qualifies as a manufacturer. The Tribunal examined these provisions, noting that "manufacture" includes any process incidental or ancillary to the completion of a manufactured product, thus encompassing job workers. Rule 2(n) further defines "job work" as processing or working upon raw materials or semi-finished goods to complete a manufacturing process, reinforcing that job workers are manufacturers.

The Tribunal cited several precedents, including JBF Industries vs. CC, EX & S.T., Vapi, Western India Forging P. Ltd. vs. CC, Ex., Pune, and Aurangabad Auto Engg Pvt. Ltd. vs. CC, Ex., Aurangabad, which support the view that job workers are manufacturers and entitled to Cenvat Credit.

2. Whether the appellant is entitled to Cenvat Credit on input services used in the manufacture of goods on a job work basis under Notification No. 214/86-CE:

The Tribunal reviewed the appellant's entitlement to Cenvat Credit on input services like rent, security, telephone, and inspection charges. The Revenue contended that as a job worker, the appellant was not eligible for Cenvat Credit because the goods were cleared without payment of duty under Notification No. 214/86-CE.

The Tribunal referenced the Larger Bench decision in Sterlite Industries (I) Ltd. vs. CCE, Pune, which held that job workers could avail credit on inputs used in manufacturing goods cleared without duty under Notification No. 214/86-CE. This decision was upheld by the Bombay High Court, establishing that credit cannot be denied to job workers where inputs are used in manufacturing goods cleared under the said notification.

The Tribunal also cited Rule 3(1) of the Cenvat Credit Rules, which allows manufacturers or service providers to take credit on input services used in manufacturing intermediate products by job workers under Notification No. 214/86-CE. This rule explicitly permits Cenvat Credit for job workers, reinforcing the appellant's entitlement.

Conclusion:

The Tribunal concluded that the appellant, as a job worker, qualifies as a manufacturer under the Central Excise Act, 1944, and the Cenvat Credit Rules, 2004. Consequently, the appellant is entitled to Cenvat Credit on input services used in manufacturing goods on a job work basis under Notification No. 214/86-CE. The impugned orders were set aside, and the appeals were allowed with consequential relief.