2016 (5) TMI 837 - AT - Central Excise

Job-work - Eligibility of refund claim - Availability of Cenvat credit - Moulds not used in appellant s factory - Ground of rejection of refund claim is beyond the scope of SCN - Appellant submitted that the SCN is faulty in as much as the applicable rule in this case is 4(5)(b) of Cenvat Credit Rules, 2004 wherein there is no condition of receiving back the moulds within 180 days. The show cause notice wrongly applied rule 4(5)(a). Held that - there can be no doubt that the spirit behind the CENVAT scheme which is a beneficial one, would be lost, if a statutory benefit is denied by wrong interpretation of certain procedural provisions which permit the facility so long as the item in question are treated either as inputs or as capital goods. Therefore, the denial of credit is clearly an error. Since the moulds in question are admittedly used by the job workers to whom the appellant had send the same by following the procedure prescribed under the CENVAT Credit Rules, denial of refund of reversed credit is not in order. Therefore, by following the judgment of Hon ble Bombay High Court as upheld by Hon ble Supreme Court in the case of CCE, Nagpur vs. Indorama Textiles Limited 2009 (10) TMI 571 - BOMBAY HIGH COURT and the Tribunal ruling in CCE & C, Daman, VAPI vs. Guala Closures (I) Private Limited 2009 (1) TMI 564 - CESTAT, AHMEDABAD , there is no condition under Rule 4(5) (b) of Cenvat Credit Rules that moulds sent by the respondents has to be brought back within 180 days and failure to do so would render the respondents liable to reverse the Cenvat credit availed on the same. The part of the order rejecting the refund claim is set aside with consequential relief. - Decided in favour of appellant

Summary

Issues:
1. Classification of CI Ingot Moulds as inputs or capital goods.
2. Eligibility of Cenvat credit on CI Ingot Moulds.
3. Compliance with Cenvat Credit Rules regarding the return of moulds.
4. Interpretation of Rule 4(5)(a) and Rule 4(5)(b) of Cenvat Credit Rules.

Analysis:

1. The issue in this case revolves around the classification of CI Ingot Moulds as inputs or capital goods. The appellant declared the moulds as inputs, but the department contended that they were capital goods. The lower authorities held that since the moulds were not used in the appellant's factory, they were not eligible for CENVAT credit. However, the Tribunal found that denial of credit should not be based on where the goods are used as long as they are used on behalf of the manufacturer.

2. The eligibility of Cenvat credit on CI Ingot Moulds was also a key issue. The appellant argued that they were eligible for credit as the moulds were used as inputs and consumed in the manufacture of intermediate goods, namely MS Ingots. The Tribunal agreed with the appellant's argument, stating that denial of credit would go against the spirit of the CENVAT scheme, which aims to provide benefits to manufacturers.

3. Another issue was compliance with the Cenvat Credit Rules regarding the return of moulds within a specified period. The department argued that the moulds became scrap at the job worker's premises and were not returned within the specified period. However, the Tribunal held that the failure to return the moulds within the specified period was due to their full utilization and consumption in the manufacturing process, which should not result in the denial of credit.

4. The interpretation of Rule 4(5)(a) and Rule 4(5)(b) of the Cenvat Credit Rules was crucial in this case. The Tribunal emphasized that denial of refund of reversed credit was not justified as the moulds were used by the job workers as per the prescribed procedure. The Tribunal cited relevant judgments and rulings to support its decision, highlighting that there was no condition under Rule 4(5)(b) requiring the moulds to be brought back within 180 days.

In conclusion, the Tribunal allowed the appeal, setting aside the part of the order rejecting the refund claim and providing consequential relief to the appellant based on a comprehensive analysis of the issues involved and relevant legal provisions.