2019 (2) TMI 852 - AT - Central Excise

Job work - Reversal of CENVAT Credit - manufacturing of intermediate product undertaken by them and in respect of which they have claimed exemption N/N. 214/86-CE. - job work activities conducted by them for principal manufacturer - applicability of Rule 6 of Cenvat Credit Rules - Held that - The issue is squarely covered by the decision in the case of D.M. Brass Extrusion and others 2018 (6) TMI 1420 - CESTAT AHMEDABAD , where it was held that As per 3rd Proviso to Rule 3(1), Even though the goods manufactured under Notification 214/86- CE, the CENVAT Credit in respect of inputs used in the said goods is admissible. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues: Appeal against demand for reversal of amount under Rule 6 of Cenvat Credit Rules for job work activities.

Analysis:
1. The appellant, engaged in manufacturing Dyes and Chemicals and undertaking job work activities, appealed against the demand for reversal of amount under Rule 6 of Cenvat Credit Rules for manufacturing intermediate products. The appellant relied on Notification No. 214/86-CE and a previous tribunal decision.

2. The Revenue argued that the job work activities were exempt from service tax under Notification No. 25/2012-ST if the principal manufacturer discharged the duty liability on the goods. The issue was whether Rule 6 of Cenvat Credit Rules applied to the appellant's activities.

3. The Tribunal referenced the decision in the case of D.M. Brass Extrusion and others, where it was observed that Cenvat Credit for inputs used in goods manufactured under Notification 214/86-CE is admissible, thus Rule 6(3) does not apply. The Tribunal also cited the Larger Bench decision in the case of Sterlite Industries (India) Ltd. to support this interpretation.

4. The Tribunal further discussed the interpretation of Rule 57C regarding Modvat credit and duty payment on final products. Various decisions were referenced to establish the admissibility of credit in specific scenarios, emphasizing the importance of avoiding a mechanical application of rules.

5. The Tribunal rejected the Revenue's reliance on a different case, Hema Engineering Industries Limited vs. CCE & ST, New Delhi, as the facts were distinguishable. Following the precedent set in the case of D.M. Brass Extrusion and others, the appeal was allowed, upholding the impugned order and dismissing the Revenue's appeals.