2017 (5) TMI 548 - AT - Central Excise

CENVAT credit - job-work - case of Revenue is that as the goods were sent by the appellant to job worker under N/N. 214/86, no duty was leviable from the job worker, that is why the duty paid by the job worker is not valid for Cenvat credit claim - Held that - the appellant is responsible for the payment of duty of Central Excise on the final product received by them from the job worker - when the job worker has factually paid the duty and when as per the N/N. 214/86, the appellant supplier, who sends the goods for job work is responsible for the payment of duty, there does not appear to be any wrong in claiming Cenvat credit for the duty paid on the job work - credit allowed - decided in favor of appellant.

Summary

Issues:
- Disallowance of Cenvat credit and penalty imposition by Commissioner (Appeals)
- Interpretation of Notification No. 214/86-CE regarding duty payment responsibility
- Validity of Cenvat credit claim based on duty paid by job worker
- Application of CBEC Circular and Stay Order in similar cases

Analysis:
The case involves an appeal by M/s Jackson & Co. against the disallowance of Cenvat credit amounting to ?29,25,544/- and imposition of an equivalent penalty by the Commissioner (Appeals). The appellant sent goods for job work under Notification No. 214/86-CE to M/s Inditex India for paint work of canopy. The Revenue contended that no duty was leviable on the job worker, hence the duty paid by the job worker is not valid for Cenvat credit claim. The Tribunal heard arguments from both sides represented by respective counsels.

The Tribunal analyzed Notification No. 214/86-CE, which states that the supplier sending goods for job work is responsible for discharging Central Excise duty liabilities on the finished products received from the job worker. It was noted that the paints and chemicals used by the job worker were duty paid, and the job worker paid Central Excise duty on the job work, despite the scheme not explicitly providing for it. Referring to CBEC Circular No. 766/82/2003-CX and a Stay Order in a similar case, the Tribunal emphasized that Cenvat credit should be allowed if the transaction is bona fide and there is no evasion or fraud.

Considering the duty payment by the job worker and the responsibility of the appellant under Notification No. 214/86, the Tribunal found no issue in claiming Cenvat credit for the duty paid on the job work. Despite the peculiar circumstances where duty payment was initiated by Revenue audit and later a show cause notice was issued to deny Cenvat credit, the Tribunal concluded that the impugned order disallowing the credit and imposing a penalty should be set aside, allowing the appeal with consequential relief.

In conclusion, the Tribunal's judgment revolved around the interpretation of the duty payment responsibility under Notification No. 214/86-CE, the validity of claiming Cenvat credit based on duty paid by the job worker, and the application of relevant circulars and previous orders in similar cases to support the appellant's claim for credit.