2008 (6) TMI 131 - AT - Central Excise

Original authority held that the job workers are earning additional amount of benefit in the form of Modvat credit - Respondent, job-worker took credit of the duty paid by principal manufacturer such availment of credit cannot be treated as job-charges or income of job-worker since there was no any sale, no any payment made by job-worker and no any flow back it cannot be treated as additional consideration

Summary

Issues:
- Appeal against the order of the Commissioner (Appeals) involving common issue
- Determination of excise duty payment and Modvat credit in job work transactions

Analysis:
The judgment involves multiple excise appeals by the Commissioner against the orders of the Commissioner (Appeals) dated in 2004. The appeals concern the determination of excise duty payment and Modvat credit in job work transactions involving various respondent firms. The original authority had demanded differential duties from the job workers and imposed penalties, which were later appealed by the parties. The key issue revolves around whether the Cenvat credit passed on by BHEL to the job workers should be considered as additional consideration or not.

The learned DR argued that the job workers suppressed the value of job charges, seeking to set aside the Commissioner (Appeals) orders. On the other hand, the Advocate for the respondents contended that there was no under-valuation and supported the Commissioner (Appeals) orders. The Tribunal carefully considered both submissions and delved into the nature of the issue, likening it to a mathematical puzzle. The Tribunal analyzed the flow of payments, duty liabilities, and the mechanism of the Cenvat scheme to determine the nature of the Cenvat credit passed on by BHEL to the job workers.

The Tribunal concluded that the Cenvat credit cannot be treated as additional consideration flowing from the job worker to BHEL. It was established that the job workers did not reduce the job charges due to the Modvat credit benefit but utilized it for paying duty on the finished product as per the scheme. The Tribunal found no actual increase in job charges when the excise duty paid by BHEL was taken as credit by the job worker. Therefore, the Tribunal agreed with the Commissioner (Appeals) and rejected the Department's appeals, citing detailed reasons for their decision.

In summary, the judgment clarifies the treatment of Cenvat credit in job work transactions, emphasizing that the credit passed on by BHEL to the job workers should not be considered as additional consideration. The Tribunal's decision aligns with the Commissioner (Appeals) orders, providing a comprehensive analysis of the excise duty payment and Modvat credit aspects in the case, ultimately rejecting the Department's appeals.