2019 (6) TMI 1491 - AT - Central Excise

CENVAT Credit - capital goods exclusively used for the manufacture of goods on job work basis availing the benefit of N/N. 214/86-CE - credit denied on the ground that the goods manufactured by the job workers are exempted under N/N. 214/86-CE. - HELD THAT - Issue decided in the case of GARUDA COTEX SHADES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, SURAT 2013 (4) TMI 619 - CESTAT, AHMEDABAD where it was held that If the job work is considered as non-exempted and the CENVAT credit is allowed on the inputs which are used on such job work items, there are no valid reason to deny the CENVAT credit of Central Excise duty paid on capital goods, which were received by the appellant during the relevant period and used in the manufacturing of very same job worked goods. Penalties set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Availment of Cenvat credit for capital goods used in job work manufacturing under Notification No. 214/86-CE.

Analysis:

The dispute in this case revolves around the availment of Cenvat credit concerning capital goods exclusively utilized for manufacturing goods on a job work basis under the provisions of Notification No. 214/86-CE. The Revenue contended that the credit should be denied as the goods manufactured by the job workers are exempted under the said notification. The appellant relied on a previous Tribunal decision in the case of Garuda Cotex Shades Limited, where a similar issue was decided in their favor.

Upon considering the arguments presented by both parties, the Tribunal referred to the decision in Garuda Cotex Shades Limited, highlighting that the denial of Cenvat credit on the capital goods was based on the misconception that the final products were exempted. The Tribunal emphasized that the goods manufactured under job work were not exempted, and therefore, the Cenvat credit on inputs used for job work items should be allowed. The Tribunal found the adjudicating authority's reasoning flawed in denying the credit on capital goods when the same goods were used for both job work and final product manufacturing.

The Tribunal's analysis emphasized that if job work is considered non-exempted and Cenvat credit is permitted on inputs used for such job work, there is no valid reason to deny the credit on capital goods used for the same purpose. Based on the precedent set by the Garuda Cotex Shades Limited case, the Tribunal allowed the appeals and set aside the penalties imposed on the appellants, as the situation in the present case aligned with the previous decision.

In conclusion, the Tribunal's judgment clarifies the eligibility of Cenvat credit for capital goods used in job work manufacturing, emphasizing that the exemption status of the final products does not impact the credit availability. The decision provides a clear interpretation of the relevant rules and notifications, ensuring that the appellant can rightfully claim the Cenvat credit for the capital goods utilized in their manufacturing processes.