2007 (7) TMI 129 - AT - Central Excise

Cenvat/Modvat Revenue contended that respondents has not maintained separate record for consumption of raw material received for job work and Cenvatable inputs used for manufacture of their own goods and confirm the demand of 8% - Demand order is set aside after considering the fact

Issues involved:
1. Whether duty paid inputs were used for manufacturing job work goods.
2. Eligibility of the respondent to avail credit on inputs used in job work.
3. Applicability of Rule 6(3) of Cenvat Credit Rules, 2002.
4. Compliance with Notification No. 214/86-CE regarding job work procedures.
5. Interpretation of Rule 4(5)(a) of Cenvat Credit Rules for duty liability on job work goods.
6. Precedents cited in support of the respondent's case.
7. Adjudication of the appeal filed by the Revenue against the Commissioner's order.

Analysis:

1. The case involved allegations that duty paid inputs were used for manufacturing job work goods, leading to a demand for payment under Rule 6(3) of the Cenvat Credit Rules, 2002. The Revenue contended that the respondent did not maintain separate stock for raw materials used in job work and for their own finished goods. The respondent argued that they did not avail credit on inputs used in job work, citing the procedure followed with the principal manufacturer.

2. The eligibility of the respondent to avail credit on inputs used in job work was questioned. The Revenue argued that the respondent was not entitled to credit on such inputs, leading to the demand under Rule 6(3) of the Cenvat Credit Rules. The respondent reiterated the findings of the Commissioner, emphasizing that they did not avail credit on inputs received from the principal manufacturer for job work.

3. The Tribunal analyzed the provisions of Rule 6(3) of the Cenvat Credit Rules, 2002 in light of the facts presented. It was crucial to determine whether the duty liability under this rule applied to the respondent based on the nature of their manufacturing activities. The Tribunal considered the specific circumstances of the case to assess the applicability of Rule 6(3) and its implications.

4. The issue of compliance with Notification No. 214/86-CE regarding job work procedures was raised. The respondent argued that they followed the necessary procedures with the principal manufacturer, which influenced the applicability of certain rules. The Tribunal had to evaluate the adherence to relevant notifications and its impact on the case.

5. Rule 4(5)(a) of the Cenvat Credit Rules was examined to understand the duty liability on job work goods. The Tribunal clarified that the duty liability rests with the manufacturer, not the job worker, for goods processed during job work. The interpretation of this rule played a significant role in determining the tax implications on the job work goods in question.

6. The respondent cited various precedents to support their case, highlighting decisions from the Tribunal and the Supreme Court. These precedents provided legal backing to the respondent's arguments and influenced the Tribunal's decision-making process. The Tribunal considered the relevance and applicability of these precedents in the current case.

7. After thorough consideration of the arguments presented by both parties and the examination of relevant legal provisions and precedents, the Tribunal upheld the Commissioner's decision to drop the demand under Rule 6(3) of the Cenvat Credit Rules, 2002. The appeal filed by the Revenue against the Commissioner's order was dismissed, emphasizing the Tribunal's findings and the lack of merit in the Revenue's contentions.

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