2016 (2) TMI 554 - AT - Central Excise

Liability to pay duty on the scrap generated at job workers premises under CENVAT Credit Rules, 2004 - Held that - As find that Hon ble High Court in case of Rocket Engineering Corporation Pvt. Ltd. (2005 (3) TMI 314 - CESTAT, MUMBAI ) has clearly held that in CENVAT Credit Rules, 2004 there is no liability of the assessee sending in the inputs for job work in respect of scrap generated at job workers end. The appellants have paid the said amounts in discharge of the liability of duty on scrap generated at job worker premises. Since they are not liable to pay excise duty on such clearances, any amount paid on this count is refundable. Since the debit was made by the appellants in their CENVAT account while invoice if any was issued by the job worker. Since they had no direct interaction with buyer of scrap question of recovering duty does not arise. Moreover debit in account was made much after actual clearance of scrap from job workers premises. The impugned order is set aside and the appeal is allowed in favour of assessee

Summary

Issues: Liability to pay duty on scrap generated at job worker's premises under CENVAT Credit Rules, 2004; Refund claim rejection based on failure to bring back scrap to principal manufacturer's premises within 180 days; Unjust enrichment; Applicability of High Court decision in Rocket Engineering Corporation Pvt. Ltd. case.

In this judgment by the Appellate Tribunal CESTAT MUMBAI, the appellants, manufacturers of motor vehicle parts, engaged in job work under Rule 4(5)(a) of CENVAT Credit Rules, 2004. They paid duty on scrap cleared by the job worker from their premises. The refund claim was rejected by the Revenue, citing the failure to bring back the scrap to their premises within 180 days and lack of evidence on unjust enrichment. The appellants argued that the liability to pay duty on scrap generated at job worker's premises was settled by the High Court decision in Rocket Engineering Corporation Pvt. Ltd. case, which held that there is no liability for the principal manufacturer in such cases. The Tribunal also referred to other decisions supporting this stance.

The Tribunal found that the High Court decision clarified that there is no duty liability for the principal manufacturer regarding scrap generated at the job worker's premises. As the appellants paid duty on the scrap cleared by the job worker, which was not their liability, the amounts paid were refundable. The Tribunal noted that the appellants debited their CENVAT account without issuing invoices, eliminating the possibility of unjust enrichment. The impugned order was set aside, and the appeal was allowed based on the High Court decision and the lack of duty liability for the appellants in this scenario.

The judgment highlights the importance of legal precedents in interpreting liability under the CENVAT Credit Rules, emphasizing that duty payment should align with actual liability and that refund claims should be assessed based on the specific circumstances of each case. The decision provides clarity on the duty obligations of principal manufacturers in job work scenarios and underscores the significance of following established legal principles in tax matters.