2018 (8) TMI 463 - AT - Central Excise

CENVAT Credit - job-worker instead of availing benefit of exemption paid duty - N/N. 214/86-CE dated 25.03.86 - Case of the department is that the job worker was supposed to avail the exemption N/N. 214/86-CE dated 25.03.86, therefore, whatever duty was paid by the job worker shall not be available as a Cenvat Credit to the appellant - Held that - N/N. 214/86-CE was not availed by the job worker, instead he paid the excise duty on the job worked goods. The department has raised no objection with regard to the payment of duty by the job worker. In such case, the duty was legally stand paid by the job worker. Even if, the job worker has not availed the exemption notification No. 214/86-CE which is conditional one, it cannot be said that he has done anything wrong. Accordingly, whatever duty paid by the job worker is legally cenvatable in the hand of the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of Notification 214/86-CE for conversion of brass scrap, availability of Cenvat Credit on duty paid by job worker, time bar for demand, scope of show cause notice (SCN) in appeal process.

Analysis:
The appellant, engaged in manufacturing brass products, sent brass scrap to a job worker for conversion into extruded brass rods under Notification 214/86-CE. The job worker paid excise duty instead of availing exemption under the notification. The appellant claimed Cenvat Credit on duty paid by the job worker. The department contended that the duty paid by the job worker should not be available as Cenvat Credit to the appellant since the job worker was supposed to avail the exemption. The Original Authority dropped the demand, but the Commissioner (Appeals) allowed the Revenue's appeal, leading to the present appeal.

The appellant argued that the duty paid by the job worker was correctly paid and should be available as Cenvat Credit since the assessment of the job worker was not challenged by the Revenue. The appellant also claimed the demand was time-barred and there was no suppression of facts as goods were declared under Notification 214/86-CE. The appellant further argued that the Commissioner exceeded the SCN's scope by disallowing Cenvat Credit based on double benefit, which was not raised in the SCN. The appellant relied on a judgment by the Hon'ble Gujarat High Court.

The Superintendent (AR) reiterated the findings of the impugned order, stating that under Notification 214/86-CE, the job worker was not supposed to pay duty, so the duty paid should not be treated as such, and the appellant should not receive Cenvat Credit. The Superintendent also cited relevant judgments in support.

Upon careful consideration, the Tribunal found that the job worker did not avail the exemption under Notification 214/86-CE and legally paid the duty. Since the job worked goods were used in the appellant's final product, the duty paid by the job worker was cenvatable to the appellant. The Tribunal clarified that the conditional nature of the notification allowed the job worker to choose whether to avail the exemption, making it legally permissible for the job worker to pay duty. Therefore, the impugned order disallowing Cenvat Credit was set aside, and the appeal was allowed.