2003 (3) TMI 183 - AT - Central Excise

Summary

Issues:
Availability of Cenvat credit on duty paid on nylon filament yarn to a company manufacturing laminated fabrics.

Analysis:
The appeal revolved around the issue of whether Cenvat credit on the duty paid on nylon filament yarn was available to the company manufacturing laminated fabrics. The company purchased nylon filament yarn on payment of duty and sent it directly to job workers for further processing. The job workers converted the yarn into knitted fabric, which was then laminated by the company. The Cenvat credit taken on the nylon filament yarn was disallowed by the authorities citing non-compliance with certain notifications and rules. The company argued that the job workers did not need to operate under a specific notification for the Cenvat credit to be allowed. They relied on Rule 57AC(5)(a) to support their claim, emphasizing that the processed inputs were brought back to the factory for use in the final product. Reference was made to relevant circulars and judicial precedents to strengthen their argument.

The Revenue, on the other hand, contended that the company did not meet the conditions specified in Rule 57AB for availing Cenvat credit. They highlighted the requirement for job workers to avail the benefit of a specific exemption notification, which was not the case in this scenario. Citing a Supreme Court decision, they emphasized the importance of following the procedures outlined in the rules before claiming any benefits. The Revenue argued that since the conditions specified in Rule 57AB were not fulfilled, the company was not eligible to take the Modvat credit.

After considering both sides' submissions, the tribunal found that the company indeed purchased inputs, sent them to job workers for processing, and received intermediary goods back for use in manufacturing final products. While the job workers were exempt from duty payment under a specific notification, the tribunal noted that the condition indirectly applied due to the exemption on the fabric manufactured by the job workers. As the intermediary goods were used in the production of dutiable final goods, the tribunal concluded that the company should not be deprived of the Cenvat credit on the duty paid for the inputs. Therefore, the tribunal allowed the appeal in favor of the company, emphasizing the availability of the Cenvat credit in the given circumstances.