2018 (1) TMI 693 - AT - Central Excise

CENVAT credit - input sent to job worker - Revenue by entertaining a view that at the time of re-credit of duty in respect of moulds and dies, the same should have been availed on the depreciated value of moulds at the rate of 2.5% quarterly - Held that - Inasmuch as there was no requirement to make payment of any excise duty when clearing moulds and dies sent to the job workers, the confirmation of demand of duty and the denial of credit on the ground that the same should have been availed on the depreciated value, at the time of receipt back of the said moulds, cannot be upheld. The duty paid by the assessee was available as a credit to the job worker and on return of the same, the job worker, was under legal obligation to pay such credit availed by them and on the basis of the same, the appellant would have availed the credit. As such, the entire situation was revenue neutral. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availment of cenvat credit on moulds and dies sent to job worker.
2. Re-credit of duty on moulds and dies at depreciated value.
3. Demand of duty for the period 2009-2011.
4. Applicability of Cenvat Credit Rules, 2004.
5. Limitation period for raising demand.
6. Revenue neutrality in the transaction.

Analysis:

1. The appellant, a manufacturer of washing machines and colour T.V., availed cenvat credit on moulds and dies sent to a job worker for manufacturing panels. The Revenue contended that the re-credit of duty on the moulds and dies should have been availed at the depreciated value of 2.5% quarterly. A show-cause notice was issued, demanding duty for the period 2009-2011, which was confirmed by the adjudicating authority and upheld by the Commissioner (Appeals).

2. The appellant argued that as per the Cenvat Credit Rules, 2004, they were entitled to the credit of duty paid on the moulds and dies sent to the job worker. The rules allowed the appellant to send the capital goods to the job worker without reversing the credit if received back within 180 days. The appellant maintained that they were entitled to re-credit the full amount of the credit reversed.

3. Upon examining the Rules, it was established that a manufacturer could avail credit on moulds and dies sent to a job worker, with the credit being re-availed upon the return of the goods to the manufacturer's factory. Since no excise duty was payable when sending the capital goods to the job worker, the demand for duty and denial of credit based on depreciated value upon return were deemed unjustified.

4. The appellant also challenged the demand on the grounds of limitation, asserting that they were a registered taxpayer, regularly filing returns, and maintaining statutory records. The absence of suppression or malafide actions justified not invoking an extended limitation period.

5. The transaction was deemed revenue-neutral as the duty paid by the appellant was available as credit to the job worker, who was obligated to pay back the credit upon return of the goods. Citing precedents, it was emphasized that in cases of revenue neutrality, longer limitation periods cannot be invoked, especially when no malafide intent is evident. As a result, the impugned order was set aside, and the appeal was allowed in favor of the appellants.