2016 (5) TMI 990 - HC - Central Excise

Ineligibility for availment of Cenvat credit and imposition of penalty - Goods sent to the job-worker without payment of duty - not received back before the expiry of 180 days therefore paid duty - Held that - there is no dispute that the amount paid by the manufacturer on capital goods sent to the job worker, was duty. As a consequence, a recipient of the goods was entitled to avail the duty paid as credit. However, the entitlement under Rule 4(5)(a) is restricted only to a period of 180 days. Since the job worker did not return it within the period stipulated, the manufacturer reversed the Cenvat credit and raised revised invoices upon the job worker and the Tribunal thought there was nothing wrong. The fact remains that duty has been paid and the Cenvat Credit is claimed only once. Therefore, the twin components that are required to be satisfied are satisfied in this case. Hence, nothing found wrong with the order of the Tribunal. - Decided against the revenue

Summary

Issues:
Challenge to CESTAT order under Section 35-G of Central Excise Act, 1944 regarding job work basis, duty payment, Cenvat Credit Rules, 2002, show cause notices, penalty imposition, questions of law on irregular credit and entitlement for Cenvat Credit.

Analysis:
The judgment by the High Court of Madras involved appeals filed by the Revenue challenging an order of CESTAT under Section 35-G of the Central Excise Act, 1944. The case revolved around a company (respondent) to whom certain jobs were entrusted on a job work basis by a manufacturer. The manufacturer sent capital goods to the job worker under Rule 4(5)(a) of the Cenvat Credit Rules, 2002, without payment of duty. However, the goods were not returned within 180 days, leading the manufacturer to pay duty and issue supplementary invoices for the goods.

The Commissioner confirmed the proposals in show cause notices issued to both the manufacturer and the job worker. The Tribunal allowed the appeals filed by the manufacturer and the job worker, prompting the Department to appeal before the High Court. The questions of law admitted for appeal included the correctness of setting aside the impugned order without considering irregular credit and penal consequences, as well as the entitlement for Cenvat Credit under specific rules.

The High Court, in its analysis, acknowledged that duty was paid by the manufacturer on capital goods sent to the job worker, making the recipient entitled to avail the duty paid as credit. However, Rule 4(5)(a) limited this entitlement to a period of 180 days, which was not met in this case. As the manufacturer reversed the Cenvat credit and issued revised invoices upon the job worker, the Tribunal found no fault in this action. The Court agreed with the Tribunal's decision, emphasizing that duty was paid and Cenvat Credit was claimed only once, satisfying the necessary components. Consequently, the questions of law were answered in favor of the respondents, and the appeals were dismissed with no costs incurred.