2017 (1) TMI 536 - AT - Central Excise

Job work - credit on capital goods - whether cenvat credit was correctly availed by the appellants on capital goods used exclusively for manufacturing goods as a job worker for their principal manufacturer? - Interest - Penalty - Held that - the Hon ble Madras High Court in the case of C.C.E., Chennai vs. Kyungshin Industrial Motherson Ltd. 2015 (11) TMI 899 - MADRAS HIGH COURT wherein it was held that wiring harness was removed without payment of duty under job work procedure to the principal manufacturer and that semi-finished goods removed by the job worker from its unit to the principal, without payment of duty, would not come within the scope of expression exempted final product used in Rule 57R(1) equivalent to Rule 6(4) of the CCR, 2004. The Tribunal has rightly held that availment of Madvat Credit on capital goods to be job work is in order - Decided in favor of the assessee.

Issues:
1. Admissibility of Cenvat Credit on capital goods and repair expenses exclusively used for job work.
2. Interpretation of relevant provisions regarding Cenvat Credit.
3. Application of prior judicial precedents to the current case.
4. Consideration of limitation period for raising demands.

Analysis:
1. The case involved the admissibility of Cenvat Credit on capital goods and repair expenses exclusively used for job work. The Appellants, a company engaged in manufacturing Lubricants Oil and Grease, were also undertaking job work for another entity. The dispute arose when the department objected to the Cenvat Credit claimed on capital goods and repair expenses used solely for job work, citing non-payment of central excise duty or service tax on the final product. Show cause notices were issued for two periods, demanding payment along with interest and penalties under Rule 15(2) of the CCR, 2004. The adjudicating authority allowed credit on service tax for repair and maintenance but confirmed a significant demand related to Cenvat Credit on capital goods, imposing penalties. The Appellants appealed against this decision, leading to the current Tribunal review.

2. The main contention revolved around whether the Cenvat Credit was correctly availed by the Appellants for capital goods used exclusively in job work. The Appellants relied on a previous Tribunal judgment and subsequent High Court affirmation in the case of Kyungshin Industrial Motherson Ltd., emphasizing that the capital goods used for manufacturing goods under job work, without payment of duty, were eligible for Cenvat Credit. The Tribunal's earlier ruling in the Kyungshin case was cited to support the Appellants' claim, where it was held that the removal of goods under job work without duty payment did not fall under exempted final products, justifying the Cenvat Credit availed by the job worker.

3. The Tribunal referred to the Kyungshin case to establish that the issue at hand was no longer res integra and was decisively settled in favor of allowing Cenvat Credit on capital goods used exclusively for job work. The judgment highlighted the specific scenario where goods were removed for job work without duty payment, clarifying that such removal did not align with exempted final products under the relevant provisions. The Tribunal's decision was reinforced by the Hon'ble Madras High Court's affirmation of the same in the C.C.E., Chennai vs. Kyungshin Industrial Motherson Ltd. case, which further solidified the legal precedent supporting the Appellants' position.

4. Additionally, the Appellants argued on the limitation aspect, asserting that certain demands were time-barred due to the absence of a legal requirement for declaration in ER-1. However, the Tribunal's focus remained on the core issue of Cenvat Credit admissibility, ultimately setting aside the Commissioner (Appeals) order and allowing the appeals filed by the Appellants based on the established judicial precedents and interpretations regarding Cenvat Credit eligibility for job work related capital goods.

← Previous Next →