2009 (1) TMI 226 - AT - Central Excise

Job Work Cenvat Credit Period of limitation - The appellants were sending zinc to smelters/converters for converting it into alloy and the smelters were adding 4 to 5 per cent of aluminium along with the magnesium and copper at their end. - Thereby the job worker retained the quantity of the zinc equal to the quantity of other materials added by them for converting virgin zinc to zinc alloy - On this basis it was found that the appellants availed excess amount of MODVAT credit in respect of zinc to the extent of 3% after allowing 1.5% as burning loss and excess credit availed thus came to Rs.1,42,535/- during the period from August 1989 to September 1993. held that - the appellants did not derive any extra benefit by following a wrong procedure. Since the deemed credit on aluminium was higher than zinc, the appellants could have got higher amount of CENVAT credit if they were to follow proper procedure on the issue of period of limitation department failed to prove that the facts were not know to is demand set aside.

Summary

Issues:
1. Whether the extended period can be applied in respect of the demand or not.

Analysis:
The case involved the appellants purchasing virgin zinc and aluminium metal, sending zinc to smelters for conversion into alloy, where the smelters added 4 to 5% of aluminium along with magnesium and copper. The revenue alleged that the appellants availed excess MODVAT credit for zinc to the extent of 3% during the period from August 1989 to September 1993. The limited issue in this appeal was whether the extended period could be applied in respect of the demand.

The learned Consultant for the appellants argued that there was no intention to avoid duty, as the appellants were entitled to deemed credit on zinc and aluminium. He highlighted that the deemed credit was higher for unwrought aluminium compared to zinc during the disputed period. The Consultant also pointed out that the appellants could have easily taken the credit available for aluminium, which was higher than that for zinc. He emphasized that the department was aware of the process, as permissions were required for sending goods for job work, and the unit was audited multiple times. Citing relevant case laws, the Consultant argued that the incorrect procedure followed by the assessee was revenue-neutral, and there was no motive to avoid duty.

The Revenue's representative contended that the appellants never disclosed that the job worker would retain some quantity of zinc sent by the assessee. They argued that the appellants deliberately concealed information to reduce job work charges. However, the Tribunal found that the appellants did not derive any extra benefit by following the wrong procedure. Since the deemed credit on aluminium was higher, they could have gained more CENVAT credit by following the correct procedure. The Tribunal also noted that permissions were required for job work removal, indicating the department's awareness of the process. Considering the facts presented, the Tribunal concluded that there was no justification for invoking the extended period and allowed the appeal regarding the application of the extended period under Section 11A for the demand.

In conclusion, the Tribunal ruled in favor of the appellants, finding no basis for applying the extended period in the demand case. The decision highlighted the importance of following correct procedures for availing credits and emphasized that the department's awareness of the process played a crucial role in determining the outcome of the case.