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2020 (2) TMI 753 - AT - Central ExciseCENVAT Credit - receipt of inputs from other units - job-worker or not - Rule 4(5)(a) of the Cenvat Credit Rules, 2004 - allegation that the Unit No.I and Unit No.II being under the same management, Unit No.I cannot be treated as a job-worker of Unit No.II - HELD THAT - The appellant company had received certain inputs from their Unit No.II for further processing and after the inputs were processed, the same were removed from Unit No.I to Unit No.II. The movement of inputs of the processed goods were carried out under Annexure-II Challans by following the procedure laid down under Rule 4(5)(a) of the Cenvat Credit Rules, 2002 - Undisputedly, the excise duty involved on the finished goods viz. transmission towers etc. had been discharged at their Unit No.II at the time of its clearance from the said unit to their respective customers. The judgement of the Hon ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE, JAIPUR VERSUS JK. UDAIPUR UDYOG LTD. 2004 (9) TMI 101 - SUPREME COURT relied upon by the adjudicating authority is not relevant, inasmuch as the Hon ble Apex Court in the said case was confronted with the issue whether explosives used in mines at a distance away from the factory was to be considered as inputs. Penalty imposed on the Managing Director is also set aside - Appeal allowed - decided in favor of appellant.
Issues:
- Demand of Central Excise duty on goods processed between two units of the same company - Imposition of penalty on the company and Managing Director Analysis: 1. Demand of Central Excise Duty: The case involved a situation where a company received inputs at Unit No.II, processed them, and then cleared the processed goods to Unit No.I for further processing. The Revenue alleged that Unit No.I should have paid the Central Excise duty on the finished goods instead of Unit No.II. The appellant argued that charging duty again on the same goods from Unit No.I would amount to double taxation as the goods had already incurred duty. They followed the procedure under Rule 4(5)(a) of the Cenvat Credit Rules for processing the inputs. The Tribunal noted that the duty on finished goods had been paid at Unit No.II before clearance to customers, indicating compliance with excise duty obligations. 2. Legal Precedents and Interpretation: The Tribunal analyzed the applicability of legal precedents cited by both parties. The judgment of J.K.Udyog Ltd. was deemed irrelevant as it concerned explosives used in mines, not the issue at hand. The Tribunal highlighted that the Supreme Court's decision in Vikram Cement case overruled the J.K.Udyog judgment. Additionally, the Tribunal referred to a previous case where it allowed an appeal in a similar situation, emphasizing that Rule 4(5)(a) of the Cenvat Credit Rules could apply even within the same manufacturer's units. The Tribunal clarified that each unit, while part of the same legal entity, is treated independently for excise law purposes. 3. Penalty Imposition: The adjudicating authority had imposed penalties on the company and its Managing Director. However, the Tribunal found that the impugned order could not be sustained based on the legal analysis and precedents discussed. Consequently, the penalties were set aside, and both appeals were allowed with any consequential benefits. The Tribunal concluded that the Unit No.II of the company had fulfilled the conditions required, and the demand for Central Excise duty from Unit No.I was not justified. In conclusion, the Tribunal ruled in favor of the appellant, setting aside the demand for Central Excise duty and penalties imposed, based on the proper application of legal provisions and precedents related to the movement of goods between units of the same manufacturer.
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