2016 (11) TMI 1204 - AT - Central Excise

Cenvat credit - duty paid job work - whether the denial of Cenvat credit on the ground that job worker should have carried out job work under Rule 4(5)(a) of Cenvat Credit Rules, 2004, hence was not supposed to pay the duty, is justified? - Held that - firstly the manufacture of Co2 Gas and filling it into cylinder is an activity of manufacture and duty is required to be paid. Secondly, even if it is accepted that activity of job worker is not amount to manufacture but job worker after receipt of duty paid material can avail Cenvat credit and pay the duty in terms of Rule 16 of Central Excise Rules, 2002. Even though the job worker s activity is not a manufacture, they are entitle to avail the Cenvat credit and clear the goods on payment of duty equal to the amount of Cenvat credit availed and duty so paid by the job worker is available as Cenvat credit to the recipient - CENVAT credit allowed to the appellant on the duty paid legally - appeal allowed.

Summary

Issues:
1. Denial of Cenvat credit on job work goods.
2. Interpretation of Rule 4(5)(a) of Cenvat Credit Rules, 2004.
3. Whether filling of Co2 gas into cylinders amounts to manufacture.
4. Jurisdiction to question duty payment by job worker.
5. Applicability of Rule 16 of Central Excise Rules, 2002.

Analysis:

1. The appellant availed Cenvat credit on duty paid job work goods, but it was denied citing that the job worker was not liable to pay duty under Rule 4(5)(a) of Cenvat Credit Rules, 2004. The Commissioner(Appeals) upheld the denial, leading to the appellant's appeal before the Tribunal.

2. The appellant argued that the job worker is a manufacturer of Co2 gas, an excisable commodity, and correctly paid duty on the value of goods. The appellant supplied materials to the job worker, who paid excise duty as a manufacturer. The appellant contended that the job worker's duty payment should not be questioned by the appellant's officers, and as no show cause notice was issued to the job worker, the duty assessment by the job worker should not affect the appellant's Cenvat credit eligibility.

3. The Tribunal noted that the activity of filling Co2 gas into cylinders constitutes manufacturing, necessitating duty payment. Even if the job worker's activity is not classified as manufacturing, they are entitled to avail Cenvat credit under Rule 16 of Central Excise Rules, 2002. This rule allows for the payment of duty equal to the Cenvat credit availed, making the duty paid by the job worker available as Cenvat credit to the recipient.

4. The Tribunal agreed with the appellant's counsel that since the duty payment by the job worker was not disputed, questioning the Cenvat credit at the appellant's end was unwarranted. Consequently, the Tribunal set aside the impugned order and allowed the appeal, emphasizing that the Cenvat credit should be granted based on the duty paid legally by the job worker.

This detailed analysis of the judgment highlights the key issues addressed by the Tribunal concerning the denial of Cenvat credit on job work goods and the legal interpretations of relevant rules and activities involved in the case.