2022 (8) TMI 827 - AT - Central Excise

CENVAT Credit - Daman Unit had sent certain cenvatted inputs (CRGO sheets) to their Vadodara unit, to undertake processing thereon - demand on the ground that processed goods have not been returned back to Daman unit, and such goods were not used in Daman unit but at Vadodara unit/ Amod Steel Processors - Rule 4(5)(a) of the Cenvat Credit Rues, 2004 - HELD THAT - Admittedly the various customers have received the processed goods and also certified to this effect and at the same time, no cogent evidence is adduced by revenue to show that such goods in fact physically travelled from Vadodara to customers premises, instead of from Daman to customer premises, as claimed by the Appellant. In any case, it is found that the entire controversy can be decided on legal basis, without entering into the chequered controversy regarding return movement of goods to Daman and from Daman to eventual customers, in light of certain admitted facts. There are merits in the legal contention raised by the Ld. Counsel for the Appellants that since the inputs were originally sent under Rule 4(5)(a) procedure to job workers, and since finally duty stands discharged by the Principal at Daman on finished goods, evenif it is cleared directly from job workers to eventual customers, neither Cenvat Credit requires to be denied to the Appellant at Daman nor duty demand can be raised on the job worker at Vadodara, even though they are the actual manufacturers, since the duty admittedly stands paid at Daman, and even collected by revenue authorities as such. The present case is not one where the Appellant claimed the benefit of Notification No.214/86-CE, but instead, one where job work procedure under the Cenvat Credit Rules, 2004 was adopted. Rule 4(6) thereof has a specific provision to permit the finished goods to be cleared directly from job worker s premises where the Principal pays duty thereon, which is done in the present case. As regards not seeking permission under Rule 4(6), the impugned order itself at Para 10.6 suggests that had such permission been sought, there would not have been any demand as such. Thus, not seeking such permission is merely a procedural lapse and there is no loss to the revenue department in the matter as such anyway. That since admittedly, in the case on hand, the Principal manufacturer, i.e. the Daman unit, paid duty on finished goods, evenif it is produced at job worker s end, there is no question of recovery of duty once again from job worker at Vadodara unit at all. As regards the Cenvat Credit demand on Daman unit, having paid duty as principal manufacturer, which is admitted by revenue authorities as well, the input stage credit too cannot be denied to them in the facts and circumstances of the present case. The appeals therefore deserve to be allowed, since the demand cannot be sustained on merits - Appeal allowed.

Issues Involved:
1. Denial of Cenvat Credit to Daman Unit.
2. Central Excise Duty Demand on Vadodara Unit.
3. Procedural Lapse under Rule 4(6) of the Cenvat Credit Rules, 2004.
4. Validity of Transport Documents and Statements by Transporters.
5. Personal Penalties on Directors and Transporters.

Issue-wise Detailed Analysis:

1. Denial of Cenvat Credit to Daman Unit:
The primary issue was whether the Daman unit was entitled to Cenvat Credit on inputs (CRGO sheets) sent to the Vadodara unit for job work, under Rule 4(5)(a) of the Cenvat Credit Rules, 2004. The revenue department argued that since the processed goods were not physically returned to the Daman unit but were cleared directly from Vadodara to customers, the Cenvat Credit should be denied. However, the Tribunal found that the Daman unit had paid the Central Excise duty on the finished goods, irrespective of whether they were physically cleared from Daman or Vadodara. The Tribunal held that since the duty was paid by the Daman unit, Cenvat Credit could not be denied.

2. Central Excise Duty Demand on Vadodara Unit:
The Vadodara unit was alleged to have cleared processed goods directly to customers without returning them to the Daman unit, leading to a demand for Central Excise duty. The Tribunal noted that duty was already paid by the Daman unit on the finished goods. It was held that since the principal manufacturer (Daman unit) had discharged the duty, the demand for duty on the Vadodara unit was not sustainable. The Tribunal emphasized that the duty payment by the principal manufacturer should suffice, and no additional duty could be demanded from the job worker (Vadodara unit).

3. Procedural Lapse under Rule 4(6) of the Cenvat Credit Rules, 2004:
The Tribunal addressed the procedural lapse of not seeking formal permission under Rule 4(6) of the Cenvat Credit Rules, 2004. It was argued that this was a mere procedural lapse and did not result in any revenue loss. The Tribunal agreed, stating that the failure to obtain such permission did not justify denying Cenvat Credit or raising additional duty demands, as long as the duty was paid by the principal manufacturer.

4. Validity of Transport Documents and Statements by Transporters:
The Tribunal examined the validity of transport documents and the statements made by transporters, which were used by the revenue department to argue that goods were not transported back to the Daman unit. The Tribunal found that the evidence provided by the revenue was not concrete and that the customers had confirmed receipt of goods under invoices from the Daman unit. It was concluded that the transport documents and statements were not sufficient to prove that goods were not returned to Daman.

5. Personal Penalties on Directors and Transporters:
The Tribunal also addressed the personal penalties imposed on the directors and transporters. Given that the demands for Cenvat Credit and duty were not sustainable, the Tribunal held that the penalties were also not warranted. The impugned orders were set aside, and all penal actions were dropped.

Conclusion:
The Tribunal allowed the appeals, setting aside the demands for Cenvat Credit on the Daman unit and the duty on the Vadodara unit. It was held that the duty payment by the Daman unit was sufficient, and no additional demands could be raised. The procedural lapse under Rule 4(6) was deemed non-substantial, and all penalties were dropped. The appeals were allowed with consequential relief as per law.

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