2008 (3) TMI 184 - AT - Central Excise

Credit in respect of inputs used in the manufacture of job work goods which are sent under 57F(4) Challan to their principal manufacturer under Notification No. 214/86 - department equating goods sent under 57F(4) challan with exempted goods to deny credit is not correct - goods which are sent to principal manufacturer are not exempted goods principal manufacturer is paying duly on impugned goods so credit on inputs cannot be denied

Summary

Issues:
1. Whether the appellant is eligible for cenvat credit in respect of inputs used in the manufacture of job work goods sent to their principal manufacturer under Notification No. 214/86 CE dated 25.3.1986.
2. Interpretation of Rule 57C of the CER in relation to the availment of Modvat credit on inputs used in the manufacture of final products cleared without payment of duty for further utilization in the manufacture of dutiable final products.
3. Relevance and applicability of past judgments in similar cases to the current matter.

Issue 1: Eligibility for Cenvat Credit:
The Commissioner (A) upheld the appellant's prayer to avail cenvat credit for inputs used in manufacturing job work goods sent to their principal manufacturer under Notification No. 214/86 CE. The Commissioner noted that job work goods are not exempted from duty as such and can only be cleared by the principal on payment of duty. The appellant cited the case of M/s. Sterilite Industries (I) Limited Vs. CCE Pune and the decision in the case of Bharat Fritz Werners Ltd Vs CCE Bangalore III Commissionerate to support their claim. The Tribunal agreed with the appellant, setting aside the Assistant Commissioner's order and allowing the appeal.

Issue 2: Interpretation of Rule 57C:
The Tribunal referred to the Larger Bench judgment in the case of M/s. Sterlite Industries (I) Ltd. Vs. CCE, Pune, which clarified that Rule 57C debars taking credit if the final product is exempted from duty or charges nil rate of duty. The Tribunal analyzed the term "exempted" and "chargeable to nil rate of duty," concluding that the job worker could have cleared goods on payment of duty, allowing the manufacturer to claim credit. The Tribunal also referenced decisions in similar cases to support their interpretation, ultimately holding in favor of the assessee based on the Supreme Court's decision in Escort v. C.C.Ex.

Issue 3: Applicability of Past Judgments:
The Tribunal considered past judgments, including the case of Shakti Insulated Wires Ltd. v. CCE & C, Mumbai-V and CCEx, Jaipur v. Noorani Textiles Mills, to support the interpretation of Rule 57C. Additionally, the Tribunal discussed the decision in Escorts Ltd. v. CC Ex, Delhi, where the Supreme Court reversed the Tribunal's decision, emphasizing that the final product being the tractor and the parts being intermediate products did not disentitle the appellant from claiming benefits under the relevant notification. The Tribunal also noted the relevance of the Bajaj Auto decision and rejected the Alpha Lavan decision, aligning with the approved ratio of the Supreme Court in the Escort Ltd. case.

In conclusion, the Tribunal found in favor of the assessee based on the interpretations of Rule 57C, the applicability of past judgments, and the eligibility for cenvat credit in the given circumstances.