2016 (5) TMI 743 - AT - Central Excise

Job worker - Eligibility of Cenvat credit - Inputs directly purchased and used in the manufacture of goods under job-work - Cleared goods without payment of duty as per the provisions contained in Notification No.214/86-CE - Held that - by following the various case laws, the Cenvat Credit to the job-worker, on inputs directly purchased and used in the manufacture of finished/intermediate goods, will be admissible even if duty is discharged by the principal manufacturer. - Decided in favour of appellant

Summary

Issues:
1. Eligibility of job-worker to take Cenvat Credit on inputs used in manufacturing intermediate goods.
2. Application of judicial decisions on similar matters by lower authorities.
3. Discharge of duty liability by the manufacturer for claiming Cenvat Credit.

Issue 1: Eligibility of job-worker for Cenvat Credit
The appeal questioned whether a job-worker can claim Cenvat Credit for inputs used in manufacturing intermediate goods subsequently cleared by the principal manufacturer. The Appellant argued citing the Sterlite Industries case upheld by the Bombay High Court and other similar judgments that such credit should be allowed. The Revenue contended that only the manufacturer discharging duty liability can claim Cenvat Credit, thus challenging the Appellant's eligibility.

Analysis: The Tribunal examined the legal position and referred to the Madras High Court's decision in the Kyunsingh Industrial Motherson case, which clarified that goods cleared as job-work under Notification No.214/86-CE are not considered "exempted final products." Additionally, the Tribunal highlighted the Sterlite Industries case's ruling that a job-worker can claim credit for inputs used in manufacturing, even if duty is paid by the principal manufacturer. Considering these precedents, the Tribunal concluded that the job-worker is indeed eligible for Cenvat Credit on inputs used in manufacturing, even if the duty is discharged by the principal manufacturer.

Issue 2: Application of judicial decisions by lower authorities
The Appellant argued that decisions of higher appellate authorities/courts on identical legal questions should be followed by lower authorities for judicial discipline. They criticized the First Appellate Authority's reliance on the Tata Motors case, asserting that the cited case laws supported the Appellant's position.

Analysis: The Tribunal referenced the Gujarat High Court's ruling in the E.I. Dupont India case, emphasizing the importance of lower authorities adhering to binding decisions/orders of higher appellate authorities/courts. The Tribunal highlighted the need for judicial discipline and criticized the arbitrary dismissal of binding decisions. By citing the Gujarat High Court's observations, the Tribunal underscored the obligation of lower authorities to follow established legal precedents, thereby ensuring consistency and avoiding unnecessary legal disputes.

Issue 3: Duty liability discharge by the manufacturer
The Revenue contended that Cenvat Credit can only be claimed by the manufacturer who discharges duty liability. They argued that since the job-worker did not discharge duty liability on the manufactured products, they were ineligible for Cenvat Credit.

Analysis: The Tribunal acknowledged the Revenue's argument but relied on the legal precedents and interpretations discussed earlier to rule in favor of the Appellant. By emphasizing the eligibility of the job-worker for Cenvat Credit based on established legal principles, the Tribunal rejected the Revenue's contention regarding duty liability discharge as the sole criterion for claiming such credit.

In conclusion, the Tribunal allowed the appeal filed by the Appellant, affirming the eligibility of the job-worker to claim Cenvat Credit on inputs used in manufacturing finished/intermediate goods, even if duty is discharged by the principal manufacturer. The decision was based on a thorough analysis of relevant legal precedents and the obligation of lower authorities to follow binding decisions of higher appellate authorities/courts for maintaining judicial discipline.