2017 (7) TMI 455 - AT - Central Excise

CENVAT credit - job-work - It appeared to Revenue that the appellants were not entitled to take CENVAT credit of duty paid on inputs unless the goods processed by the job workers were received in the factory of the appellant - Held that - it is settled principles of law that Cenvat credit cannot be denied for the reason that the inputs were directly sent to the job workers particularly when the inputs were received after processing and were brought into the factory and duty on the final product was paid - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Denial of Cenvat credit on duty paid inputs sent directly to job workers.
2. Interpretation of Rule 4 of Cenvat Credit Rules, 2002/2004.
3. Admissibility of Cenvat credit based on Rule 3 of Cenvat Credit Rules, 2002/2004.
4. Precedents related to Cenvat credit denial when inputs sent to job workers.

Analysis:
The case involved an appeal by M/s United Cable Industries against an Order-in-Appeal denying Cenvat credit of duty paid on inputs. The dispute arose as the appellants sent raw materials directly to job workers under Job Work Challan and claimed Cenvat credit. The Revenue alleged that the credit was impermissible unless goods processed by job workers were received in the appellant's factory. The Original Authority upheld the denial of credit, leading to the appeal before the Commissioner (Appeals) and subsequently to the Tribunal.

The appellant argued that the denial was solely due to procedural lapses, emphasizing that the inputs were eventually received in the factory, used in manufacturing final products, and duty was paid on the final clearance. The appellant contended that the Cenvat credit was admissible, and any contravention of Rule 4 of Cenvat Credit Rules, 2002/2004 was not established. The appellant highlighted that goods were processed by job workers, received back, and used in manufacturing final products cleared after duty payment.

During the hearing, the appellant's counsel referred to CBEC instructions during the Modvat credit period allowing direct supply to job workers. They relied on legal precedents, including a Karnataka High Court ruling and a Tribunal order, to support their argument that Cenvat credit cannot be denied merely due to direct supply to job workers. On the other hand, the Revenue supported the Order-in-Appeal dated 30/03/2007.

Upon evaluating the arguments and facts, the Tribunal concluded that Cenvat credit cannot be refused based on direct supply to job workers, especially when the inputs were processed, returned to the factory, and duty was paid on the final products. The Tribunal set aside the Order-in-Appeal, allowing the appeal and entitling the appellant to consequential relief in accordance with the law.