2009 (8) TMI 245 - AT - Central Excise

Credit denied and penalty was imposed on the ground that the Appellant availed credit in respect of duty paid on adhesive tapes which are used in respect of the exempted goods - . Contention of Appellant is that they are manufacturing veneer which is being cleared on payment of duty and the adhesive tapes are used in respect of veneer which is cleared on payment of duty. - The Appellant is also undertaking job-work for manufacture of veneer on behalf of the principal and the adhesive tapes were not used in the veneer manufactured on job-work basis as the same was being cleared in wet condition. The Appellant produced copies of challans under which the veneer in green form is being cleared to their principal manufacturer. - The challans are statutory documents. Hence I find merit in the contention of the Appellants - In this regard further I find no investigation was conducted at the end of the principal on whose behalf the green veneer is being manufactured by the Appellants whether the adhesives tapes are applied by the Appellants or by the principal in spite of the fact that in the reply to the show cause notice it was specifically mentioned that the adhesive tapes are not being used by the Appellants in the goods which was manufactured on job work basis. Therefore the impugned order is set aside and Appeal is allowed.

Summary

Issues:
1. Denial of credit on duty paid for adhesive tapes used in manufacturing exempted goods.

Analysis:
The appeal was filed against an order denying credit of Rs. 33,850 and imposing a penalty due to availing credit on duty paid for adhesive tapes used in exempted goods. The Appellant argued that they manufacture veneer cleared on duty payment, and the adhesive tapes are used in this process. They also perform job-work for veneer manufacture, where adhesive tapes are not used as the veneer is cleared in wet condition. The Appellant provided evidence such as challans and a letter from the principal manufacturer supporting their claim. The Revenue contended that the evidence was not before the lower authority, and credit was denied as adhesive tapes were used in exempted goods. However, the Tribunal found merit in the Appellant's argument as the veneer was cleared in wet condition, and no investigation was conducted at the principal's end regarding the use of adhesive tapes. As the adhesive tapes were not used in job-work goods, the impugned order was set aside, and the appeal was allowed.

This case centered on the denial of credit for duty paid on adhesive tapes used in manufacturing exempted goods. The Appellant successfully argued that the adhesive tapes were not used in the job-work goods cleared in wet condition, as evidenced by statutory documents like challans. The Tribunal noted the lack of investigation at the principal's end regarding the use of adhesive tapes, despite the Appellant's specific mention in the show cause notice reply. As a result, the Tribunal set aside the impugned order and allowed the appeal, highlighting the importance of proper investigation and evidence consideration in such cases.