2016 (4) TMI 101 - AT - Central Excise

Denial of cenvat credit - inputs and capital goods sent to job-worker for further processing and the inputs sent directly to job-workers for further processing - Held that - As regards inputs and capital goods sent to job-worker and not received within 180 days, find that the learned counsel was correct in bringing to notice that the appellant had prepared challans for movement of inputs, partially processing inputs and capital goods as provided under Rule 4(5)(a) of the Cenvat Credit Rules. The said challans indicate clearly that the goods were sent to Himachal Pradesh unit and received back by the appellant within 180 days as mandated in the said rule. These documents were produced before the first appellate authority, as well as the adjudicating authority but the adjudicating authority did not take cognizance of the said documents. Tribunal being the last fact finding authority, after considering the documents which are produced thus hold that they indicate that the inputs and capital goods were received back within 180 days from the clearance to the job-worker. Provisions of Rule 4(5)(a) of Cenvat Credit Rules are fully satisfied and the impugned order to that extent is correct. As regards the inputs sent directly to job-worker for manufacture of final products, on a careful reading of the proviso to the said Rule 4(5)(a)(1) it contemplates that the appellant has to evidence that the inputs delivered directly to the job-worker are received back from the job-worker and accounted in his records. On a specific query from the bench, the learned counsel was unable to bring on record or show from the record that the respondents had prepared any challan for movement of inputs under the provisions of Rule 4(5)(a) of Cenvat Credit Rules, for the goods delivered directly nor is he able to show from records that the inputs delivered directly to the job-worker s premises were received back within 180 days. Thus in the absence of any evidence to support the case, it has to be held that the said cenvat credit availed on such inputs delivered directly is incorrect and needs to be demanded from the respondent. Allow the appeal of the Revenue on this issue by upholding the order-in-original and confirming the demand of ₹ 5,20,872/- education cess of ₹ 1,400/- along with interest. Penalty imposed on the respondent are unwarranted

Summary

Issues Involved:
Appeal against denial of cenvat credit on inputs and capital goods stored outside factory premises, non-receipt of certain inputs/capital goods within 180 days, availing credit on inputs sent to different unit, interest, and penalties.

Analysis:

Issue 1: Denial of Cenvat Credit on Inputs and Capital Goods Stored Outside Factory Premises
The respondent, a manufacturer of excisable goods, availed cenvat credit on inputs used for flexible packaging. The Revenue issued a show cause notice on various grounds, including availing credit on inputs stored outside factory premises. The adjudicating authority dropped the demand for a specific amount, which was confirmed by the first appellate authority. The Tribunal found that the provisions of Rule 4(5)(a) were satisfied as the goods were received back within 180 days, upholding the order.

Issue 2: Non-Receipt of Inputs/Capital Goods Within 180 Days
The Revenue contested the cenvat credit availed on capital goods and inputs not received back from the job-worker. The Tribunal noted that the appellant provided evidence through challans that the goods were sent to Himachal Pradesh unit and received back within 180 days, meeting Rule 4(5)(a) requirements. The impugned order was set aside on this issue, confirming the demand and interest.

Issue 3: Availing Credit on Inputs Sent to Different Unit
Regarding availing credit on inputs sent directly to the job-worker, the respondent's counsel argued that the goods were delivered to their own unit, which was supported by documentation. However, the Tribunal found a lack of evidence to support the case as per Rule 4(5)(a), leading to the conclusion that the credit availed on such inputs was incorrect. The order-in-original was upheld, confirming the demand and interest on this issue.

Issue 4: Interest and Penalties
Since the issues involved interpretation of rules, the penalties imposed on the respondent were deemed unwarranted and set aside. The impugned order was partially upheld and partially set aside, disposing of the appeal accordingly.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, and the Tribunal's findings on each issue, ultimately resulting in the disposal of the appeal.