2007 (10) TMI 152 - AT - Central Excise

Procurement of inputs by job worker in name of assessee appellants have engaged job-worker for same so credit can t be denied on ground of non-compliance with procedural requirement u/r 12B(4) or by saying that assessee hasn t undertaken mfg. of final good

Issues Involved:
1. Denial of CENVAT credit on inputs.
2. Compliance with Rule 12B of the Central Excise Rules, 2002.
3. Procedural requirements under Rule 12B(4).
4. Maintenance of proper accounts regarding consumption of fabrics.

Issue-wise Detailed Analysis:

1. Denial of CENVAT Credit on Inputs:
The Commissioner denied CENVAT credit on inputs to the appellants on three grounds:
(a) The input was not received in the factory of the appellants.
(b) The appellants did not manufacture the garments.
(c) Documents indicated excess production vis-a-vis the quantity of fabrics purchased by the appellants.

The Tribunal noted that the appellants were engaged in the manufacture and export of garments, which became dutiable from 1-4-2003. The garments were manufactured by M/s. Celebrity Fashions Ltd. (CFL) as job workers for the appellants, and the appellants claimed CENVAT credit for the inputs used in these garments. The Tribunal found that the appellants were entitled to take CENVAT credit of the duty paid on the fabrics procured in their name by M/s. CFL and used for conversion into garments for export. The Commissioner's order for recovery of the amount from the appellants was deemed bad in law.

2. Compliance with Rule 12B of the Central Excise Rules, 2002:
The Tribunal examined Rule 12B, which provides for job work in textile and textile articles. Sub-rule (1) mandates that a person who gets textile articles manufactured on job work basis must obtain registration, maintain accounts, pay duty, and comply with all relevant provisions as if he is an assessee. Sub-rule (2) allows the person engaging the job worker to clear excisable goods for home consumption or export from the premises of the job worker, provided duty is paid and an invoice is prepared in the prescribed manner.

The Tribunal found that the appellants and M/s. CFL were acting under sub-rule (2) of Rule 12B. The fabrics procured by M/s. CFL in the name of the appellants were retained for conversion into garments, which were then cleared for export. The appellants issued the requisite invoices, and M/s. CFL entered the particulars of date and time of removal of goods for export. The Tribunal accepted the appellants' argument that sub-rule (3) permitted the fabrics to be retained by the job worker for conversion into garments without reversing the CENVAT credit.

3. Procedural Requirements under Rule 12B(4):
Learned SDR argued that the appellants had not fulfilled the requirement of supplying input to the job worker under the requisite document as per sub-rule (4). This sub-rule requires a document covering the supply of goods to the job worker to be in duplicate, in printed format, with printed running serial number, and signed by the sender or authorized representative. However, the Tribunal found that these provisions were not applicable where there was no movement of goods from the premises of the appellants to those of the job worker.

4. Maintenance of Proper Accounts Regarding Consumption of Fabrics:
The department alleged that the appellants' consumption of fabrics was several times more than the quantity purchased, suggesting that the appellants had not actually received the quantity of fabrics shown in the invoices and had taken CENVAT credit on the entire quantity mentioned. The Tribunal noted that the department should have compared the total quantity of fabrics purchased during the entire period with the total quantity consumed, rather than comparing monthly figures. The total purchase was 6,19,904.66 meters, and the total consumption was 6,36,999.83 meters, with a minimal difference of about 17,000 meters. The Tribunal found this difference explainable and not sufficient to deny the CENVAT credit.

Conclusion:
The Tribunal set aside the Commissioner's order, holding that the appellants were entitled to the CENVAT credit in question. As the final product was exported, the appellants were also entitled to claim a refund of the unutilized credit. The appeal was allowed.

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