2005 (6) TMI 165 - AT - Central Excise

Cenvat/Modvat - inputs used in the manufacture of machine - Notification 67/95-C.E. - job work - demand duty - Interest - Penalty - HELD THAT - We have gone through the records of the case carefully. The appellants received certain dutiable inputs and manufactured machines. They utilised these machines for job work. After job work, the goods were sent under 57F(4) Challan to the principal manufacturers. The department is of the view that the machines manufactured by the appellant are exclusively used in the manufacture of the exempted goods. Therefore, the inputs are not entitled for Cenvat credit. In other words, the department is equating goods sent under 57F(4) challan with exempted goods. This is not correct. The goods, which are sent to principal manufacturer, are not exempted goods. Ultimately, they would be cleared on payment of duty. Hence, the reasoning adopted by the department is not correct. Moreover, all the case laws cited by the appellant are very relevant in deciding this issue. In the case of KSH International 2004 (1) TMI 721 - ITAT MUMBAI , the Tribunal rejected the Revenue appeal and held that clearance of goods on job work does not amount to clearance under full exemption or at Nil rate of duty. The ratio of this decision is squarely applicable to the present case. Thus, we allow the appeal and set aside the impugned order.

Summary

Issues: Appeal against denial of Cenvat credit on inputs used in the manufacture of machines for job work under Notification 67/95-C.E.

Analysis:
1. Background: The appellant, engaged in manufacturing CNC Machines and other specialized machines, availed Cenvat credit on inputs used in manufacturing machines for job work purposes under Notification 67/95-C.E.

2. Denial of Credit: The Revenue denied Cenvat credit on inputs used in machines exclusively for job work, claiming they were put to use for processing exempted goods. The original authority demanded duty, interest, and imposed penalties under relevant rules.

3. Appeal: The Commissioner (Appeals) upheld the denial of credit, prompting the appellant to challenge the decision, arguing that the goods processed for job work were not exempted but cleared on payment of duty.

4. Appellant's Argument: The appellant contended that goods processed for job work were not exempted, as they were cleared on payment of duty after job completion. Citing relevant case laws like Sterilite Industries and Escorts Ltd., the appellant argued for the admissibility of Cenvat credit on inputs used for job work.

5. Tribunal Decision: After careful review, the Tribunal found the department's reasoning flawed, equating goods sent for job work under 57F(4) challan with exempted goods. Referencing case laws like KSH International, the Tribunal ruled in favor of the appellant, allowing the appeal and setting aside the impugned order.

6. Conclusion: The Tribunal's decision highlighted that goods processed for job work were not exempted but cleared on payment of duty, thus entitling the appellant to Cenvat credit on inputs used in manufacturing machines for job work purposes. The judgment emphasized the relevance of case laws in determining the admissibility of credit in such scenarios.