2016 (9) TMI 419 - AT - Central Excise

Job-work - Cenvat credit - cutting charges - service tax paid for conversation of paper reel into paper sheet - cutting is done after clearance of goods at the factory gate - duty paid at the factory gate in reel form - Held that - in this case the respondent is including cutting charges in the assessable value of clearance paper in reel form from factory gate. In that circumstances, I hold that the respondent is entitled to avail cenvat credit of service tax paid on cutting charges, therefore, I do not find any infirmity in the impugned order and the same is upheld. - Decided against the Revenue

Summary

Issues:
Whether the respondent is entitled to avail Cenvat credit on cutting charges?

Analysis:

The case involved a dispute where the respondent, a manufacturer of paper, was clearing paper in reel form from their factory gate and paying duty on it. Subsequently, the paper was cut into sheets by a job worker after clearance from the factory gate. The Revenue contended that since cutting was done after clearance at the factory gate, the service tax paid by the job worker on cutting charges should not be admissible as Cenvat credit to the respondent. A show cause notice was issued, and after adjudication, the Cenvat credit was denied, and duty along with interest and penalty was imposed. The Commissioner (A) observed that cutting charges were included in the assessable value of the paper reel from the factory gate, allowing Cenvat credit. The Revenue appealed this decision.

The Appellate Tribunal considered the submissions from both parties. The main issue was whether the respondent was entitled to avail Cenvat credit on cutting charges. The respondent had included cutting charges in the assessable value of the paper in reel form cleared from the factory gate. The Tribunal held that since cutting charges were included in the assessable value, the respondent was entitled to avail Cenvat credit on the service tax paid for cutting charges. Therefore, the impugned order denying Cenvat credit was upheld, and the appeal filed by the Revenue was dismissed.

In conclusion, the Tribunal ruled in favor of the respondent, allowing them to avail Cenvat credit on cutting charges as they had included these charges in the assessable value of the paper cleared from the factory gate. The decision was based on the interpretation of relevant provisions and previous orders supporting the inclusion of cutting charges in the assessable value.