2015 (10) TMI 2276 - AT - Central Excise

CENVAT Credit - Whether the credit availed on H.R.Sheets of thickness less than 4 mm is admissible or not - Held that - when the duty on HR sheets is not paid on the basis of thickness but on the basis of weight, the use of HR sheets of less than 4 mm thickness has no bearing on availing the credit. Revenue does not raise any discrepancy with regard to the weight of input used and weight of final product manufactured. Again, Revenue does not have any case that the HR sheets of less than 4 mm thickness procured by the appellant was diverted in any manner. The department has come to a conclusion without any basis that HR sheets of less than 4 mm thickness is not used by the appellant in manufacture of final products. It is immaterial whether the final product could be manufactured without actually using a particular input or not. What is actually material is whether the assessee has used the inputs in or in relation to manufacture of final products. I find that the assessee has been able to establish that they have used HR sheets less than 4 mm in the manufacture of final products by way of statement given by the managing director of the appellant and certificate issued by the chartered engineer. In view thereof, I hold that denial of credit on HR sheets less than 4 mm thickness is unjustified. Whether the appellant is liable to pay duty on scrap generated at the job workers end. - Held that - when the waste and scrap is generated at the job workers premises and inputs are supplied by the appellants then the duty liability is not to be fastened on the principal manufacturer. Similar view has been taken in Mukand Ltd. Vs .CCE, Belapur- 2015 (2) TMI 703 - CESTAT MUMBAI . Following the ratio laid in the above judgements, I am of the view that the appellant is not liable to pay duty towards waste and scrap generated at the job worker s premises. - Decided in favour of assessee.

Summary

Issues:
1. Admissibility of credit availed on H.R. Sheets of less than 4 mm thickness.
2. Liability of the appellant to pay duty on scrap generated at the job worker's end.

Admissibility of Credit on H.R. Sheets:
The case involved the appellant manufacturing parts of motor vehicles and availing credit on inputs, specifically H.R. Sheets. The department alleged that the appellant wrongly availed credit on H.R. Sheets less than 4 mm in thickness. The appellant explained that they used these sheets by welding them to meet customer requirements when 4 mm sheets were unavailable. The department issued a show cause notice for wrongful credit availed and unpaid central excise duty on scrap generated during job work. The Commissioner (Appeals) upheld the order, leading to an appeal before the Tribunal.

The appellant argued that they used H.R. Sheets less than 4 mm thickness by welding them to meet customer specifications when 4 mm sheets were unavailable. They presented a certificate from a chartered engineer supporting their claim. The Revenue relied on statements claiming the appellant did not use sheets less than 4 mm. However, the Tribunal noted that duty was paid based on weight, not thickness, and there was no discrepancy in input versus final product weight. The Tribunal found the appellant justified in using sheets less than 4 mm and allowed the credit.

Liability for Duty on Scrap:
The second issue concerned the duty liability on scrap generated at the job worker's premises. The appellant argued they had an arrangement with the job worker not to receive the scrap in the factory to avoid transportation costs. Citing precedents, the appellant contended that duty liability for scrap generated at the job worker's premises should not fall on the principal manufacturer. The Tribunal agreed with the appellant, referencing previous judgments, and held that the appellant was not liable to pay duty on the waste and scrap generated at the job worker's premises.

In conclusion, the Tribunal allowed the appeal in favor of the appellant on both issues, granting consequential relief. The judgment highlighted the admissibility of credit on H.R. Sheets less than 4 mm thickness and the appellant's exemption from duty liability on scrap generated at the job worker's premises based on established legal principles and precedents.