2005 (10) TMI 11 - AT - Central Excise

Yarn sent to job worker on payment of duty. Received back without payment of duty in terms of exemption notification and in dutiable final product - credit on basis of his own invoice for the yarn

Summary

Issues: Whether a manufacturer can avail Cenvat credit based on their own invoice for duty paid on inputs processed by a job worker.

The judgment by the Appellate Tribunal CESTAT Chennai pertains to a case where the respondents, manufacturers of cotton and polyester yarns, dispatched consignments of cotton yarn for mercerization to a job worker. The job worker processed the yarns and sent them back to the respondents without payment of duty, claiming benefit under Notification No. 3/2001-C.E. The respondents then took Cenvat credit of the duty paid on the inputs based on their own invoices. The department objected to this, arguing that the respondents could not avail Cenvat credit using their own invoices. The original authority upheld the objection, but the first appellate authority overruled it, leading to the Revenue's appeal.

Upon examination, the key issue identified was whether a manufacturer of final products could claim Cenvat credit for duty paid on inputs using their own invoice. The department's objection was solely based on the use of the manufacturer's own invoice as the duty-paying document. It was noted that the respondents had indeed utilized the inputs in manufacturing final products within their factory and had paid duty when clearing the inputs for processing by the job worker. The Tribunal emphasized that if the respondents had irreversibly cleared the goods to a customer, the customer would have been able to claim Cenvat credit based on the manufacturer's invoice. Therefore, in this scenario, the Tribunal concluded that the manufacturer's invoice, evidencing duty payment on the inputs, was a valid duty-paying document for Cenvat credit purposes. The Tribunal upheld the impugned order, rejecting the Revenue's appeal.

In conclusion, the Tribunal ruled in favor of the respondents, allowing them to avail Cenvat credit based on their own invoices for duty paid on inputs processed by a job worker. The decision highlighted the importance of consistency in treating invoices as duty-paying documents for Cenvat credit purposes, ultimately supporting the respondents' position in the case.