2017 (12) TMI 1151 - AT - Central Excise

CENVAT credit - inputs used by their sub-contractor in their factory for making various equipments - denial on the ground that the goods have been used by job workers and not by the appellant - Held that - Rule 2 of the said Rules permits a manufacturer to take credit of specified duties paid on such capital goods received by the factory. It is apparent from the above Rules that there is no requirement for the manufacturer to purchase the said capital goods to avail cenvat credit. The only requirement is that he should receive the goods falling under the definition of capital goods in his factory. It is seen that the entire case is built on the assertion that the goods on which credit has been availed, whether invoice to job worker or the appellant, are used by the job worker for the erection of the plant/machinery/equipment specified in the show cause notice. It is apparent that there is no requirement under the Cenvat Credit Rules, 2002 for the manufacturer availing credit to himself purchase the goods. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against demand for reversal of cenvat credit availed in respect of inputs used by sub-contractor for making equipments.

Analysis:
1. The appellant, M/s. Shree Dutta SSK Ltd., filed an appeal against the confirmation of demand for reversal of cenvat credit availed in respect of inputs used by their sub-contractor for making various equipments. Despite multiple notices, no one appeared for the appellant, and the matter was decided without further notice as the unit had been taken over by another entity. The demand was raised in respect of items used by job workers for erection of various plants.

2. The main argument for denying cenvat credit was that the goods were used by job workers and not by the appellant. The show cause notice highlighted that the sellers manufactured some parts of the machinery, some were procured from other sources, and some were assembled at the factory site. The appellant argued that they were entitled to cenvat credit as per various judicial pronouncements. However, the Commissioner distinguished those cases and confirmed the demand, imposing penalties and interest under relevant sections of the Central Excise Act.

3. The Assistant Commissioner argued that the job workers had the sole responsibility for design, manufacture, procurement, supply, and erection of the machinery. He contended that the job workers should be considered as manufacturers, and credit cannot be allowed just because invoices were issued in the appellant's name. The Tribunal examined the definition of capital goods under the Cenvat Credit Rules, noting that there is no requirement for the manufacturer to purchase the capital goods to avail credit, as long as they are used in the factory. The Tribunal found no merit in the Revenue's argument and allowed the appeal, emphasizing that the goods fell under the definition of capital goods.

4. The Tribunal's decision was based on the fact that the goods used by the job workers fell under the definition of capital goods, and there was no requirement for the manufacturer to purchase those goods to avail cenvat credit. The Revenue's argument that the goods were used by job workers and not the appellant did not hold as per the Cenvat Credit Rules. The Tribunal found no merit in the impugned order and allowed the appeal, emphasizing the lack of challenge by the Revenue regarding the classification of goods as capital goods.

5. In conclusion, the Tribunal allowed the appeal, highlighting that the Cenvat Credit Rules did not necessitate the manufacturer to purchase the goods to avail credit, as long as the goods were used in the factory and fell under the definition of capital goods. The decision was pronounced in court on 29/11/2017.