2017 (11) TMI 1382 - AT - Central Excise

CENVAT credit - job-work - inputs sent to the Job Workers and have not been received back in 180 days - Held that - at the job worker s end there is process loss. To this effect, job workers have issued a certificate certifying that inputs lost during the process has become waste - the inputs which gone to the waste and scrap generated at the job worker s end, the appellant is not required to reverse Cenvat credit - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against denial of Cenvat credit on inputs sent to job workers not received back within 180 days.

Analysis:
The appellant, a manufacturer of refrigerator equipment, sent inputs to job workers for processing but did not receive the processed goods back in the stipulated time. Consequently, Cenvat credit was denied, leading to the appellant's appeal. The appellant argued that losses occurred during processing by the job workers, resulting in fewer goods returned. The job workers issued a certificate confirming the losses, which the Revenue did not dispute. Citing a previous Tribunal decision, the appellant contended that they should not be required to reverse the Cenvat credit. On the contrary, the Revenue argued that since the inputs were not received back within 180 days, Rule 4(5)(a) of the Cenvat Credit Rules mandated the reversal of credit.

Upon hearing both parties, it was established that there was process loss at the job worker's end, confirmed by a certificate from the job workers. This loss led to the appellant receiving fewer inputs back than initially sent for processing. Referring to a previous case, the Tribunal clarified that input contained in waste and scrap generated during manufacturing is admissible for Cenvat credit, regardless of whether the scrap is generated by a job worker availing SSI exemption. Consequently, the Tribunal found no merit in the impugned order and set it aside, allowing the appeal with consequential relief. The Cenvat credit denial was overturned, and the appellant was granted relief.

In conclusion, the Tribunal ruled in favor of the appellant, holding that the denial of Cenvat credit was unjustified. The impugned order was set aside, and the appeal was allowed with consequential relief for the appellant.