2017 (5) TMI 1020 - AT - Central Excise

CENVAT credit - capital goods - job-work - denial on the ground that the capital goods received were used exclusively in the manufacture of goods on job work basis, which were cleared without payment of duty under N/N. 214/86-CE and hence the provisions of Rule 6(4) of CCR, 2004 would become applicable - Held that - if the appellant is manufacturing the exempted goods, they are not entitled to take credit on the capital goods - It is admitted position in this case that the goods have cleared by the appellant on job work basis and such goods are dutiable or otherwise. The said goods job worked goods supplied to principal manufacture which have been cleared on payment of duty. In that circumstance, it cannot be said that the appellant is engaged in the manufacturer of exempted goods - In fact the said goods are dutiable. In that circumstance, also the credit cannot be denied to the appellant. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Admissibility of Cenvat credit on capital goods exclusively used in the manufacture of exempted goods under Rule 6(4) of Cenvat Credit Rules, 2004.

Analysis:
1. The appellant, engaged in manufacturing bulk drugs and menthol products, received duty paid capital goods during 2003-2007. The department contended that the appellant was not eligible for cenvat credit on these capital goods as they were used exclusively in manufacturing goods on job work basis, cleared without duty payment. The Commissioner upheld this decision, leading to the appeal.

2. The appellant argued that as a job worker, they were entitled to cenvat credit on capital goods used in manufacturing excisable goods for the principal manufacturer. They cited legal precedents supporting their claim, emphasizing that denial of credit was unjustified as the final products were dutiable, and excise duty was paid by the principal manufacturer.

3. The main issue revolved around the interpretation of Rule 6(4) of Cenvat Credit Rules, 2004, which prohibits cenvat credit on capital goods used in manufacturing exempted goods. The Tribunal analyzed this rule and the facts of the case, determining that since the job worked goods were dutiable and cleared on payment of duty, the appellant was not engaged in manufacturing exempted goods, thus entitled to cenvat credit.

4. The Tribunal highlighted that denial of credit solely based on the lack of an undertaking from the principal manufacturer, as required by a notification, was unjustified. The case law and legal principles cited supported the appellant's position that denial of credit was unwarranted in the given circumstances.

5. Referring to past judicial decisions, the Tribunal concluded that the appellant rightfully claimed cenvat credit on the capital goods used in manufacturing job worked goods. Consequently, the appeal was allowed, granting the appellant the benefit of cenvat credit on the capital goods.

6. The judgment emphasized the importance of complying with legal provisions and ensuring fair treatment of taxpayers in matters concerning cenvat credit eligibility, especially when goods are dutiable and excise duty is paid. The decision provided clarity on the admissibility of cenvat credit in similar cases involving job work manufacturing of goods ultimately subject to duty payment.