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2024 (7) TMI 473 - AT - Central ExciseCENVAT Credit - Furnace Oil used for manufacture of job worked goods - interpretation of Rule 2(K) and Rule 6 of the CENVAT Credit Rules, 2004 - HELD THAT - The furnace oil used by the Appellant for heating the MS Ingots / Billets for the manufacture of rolled products on his own account satisfies the definition of the term input but the furnace oil used in the manufacture of finished goods on behalf of the principal manufacturer does not satisfy the definition of inputs, as the rolled products manufactured on job work basis are the final products of the principal manufacturer and not the final products of the Appellant. The above issue is no more res integra as in the appellant s own case, the issue was decided in favor of the appellant for the earlier periods by the Tribunal in DECCAN ALLOYS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CHENNAI-III 2018 (9) TMI 1058 - CESTAT CHENNAI where it was held that ' No duty has been discharged by appellants. The adjudicating authority has found merit with the arguments of appellants that Notification No.214/86-CE is not an exemption Notification but it is merely postponing payment of duty at the time and removal of finished goods by principal manufacturer. However having come to this conclusion, the adjudicating authority has held that there is yet another condition that input should be used by manufacturer of final products, and has held that since appellants are not manufacturer of final products, the credit availed on furnace oil used by them for job work basis cannot be allowed since the same are not used for final products of the appellants. ' The impugned order is set aside - appeal allowed.
Issues Involved:
1. Eligibility for availing CENVAT Credit on Furnace Oil used for the manufacture of job-worked goods. 2. Definition and interpretation of "exempted goods" under Notification No. 214/86-CE. 3. Requirement to maintain separate inventory for inputs used in dutiable and exempted goods. 4. Imposition of penalties for alleged improper availing of CENVAT credit. Detailed Analysis: 1. Eligibility for availing CENVAT Credit on Furnace Oil used for the manufacture of job-worked goods: The central issue in this case is whether the appellant is eligible to avail CENVAT Credit on Furnace Oil used in the manufacture of goods on a job work basis. The appellant argued that they availed CENVAT credit on Furnace Oil as a job worker, converting MS Ingots and MS Billets into rolled products, which are then cleared by the principal manufacturer on payment of duty. The appellant contended that the goods manufactured and cleared under Notification No. 214/86-CE are not exempted goods, thus the provisions of CENVAT Credit Rules should not apply, and they should not be required to reverse the CENVAT credit on the Furnace Oil used. 2. Definition and interpretation of "exempted goods" under Notification No. 214/86-CE: The appellant argued that Notification No. 214/86-CE does not exempt goods manufactured by a job worker unconditionally but merely postpones the duty payment and shifts the liability to the principal manufacturer. The appellant relied on case laws such as Commissioner of Central Excise, Ludhiana Vs. Modi Sales, Vishal Pipes Ltd. Vs. Commissioner of Central Excise, Noida, and Commissioner of Central Excise Vs. Happy Forging Ltd., to support their claim that job-worked goods are not exempted goods and that they correctly availed CENVAT credit on Furnace Oil. 3. Requirement to maintain separate inventory for inputs used in dutiable and exempted goods: The Department's case was based on the premise that the appellant should maintain separate inventory for inputs used in the manufacture of dutiable goods and exempted goods. The Department argued that the furnace oil used by the appellant for heating MS Ingots/Billets for the manufacture of rolled products on a job work basis does not satisfy the definition of "inputs" as the rolled products are the final products of the principal manufacturer and not the appellant. 4. Imposition of penalties for alleged improper availing of CENVAT credit: The appellant contended that the imposition of penalties was unjustified as there was no suppression of facts with intent to evade payment of duty. They believed they were eligible for CENVAT credit on the input (furnace oil) used in the manufacture of the final product both on their own behalf and on behalf of the principal manufacturer. Tribunal's Findings: The Tribunal found that the issue was no longer res integra as it had been decided in favor of the appellant in their own case for earlier periods. The Tribunal noted that the adjudicating authorities had gone beyond the scope of the Show Cause Notices (SCNs) by changing the grounds for confirming the demand. The Tribunal referred to previous decisions, including Federal Mogul Goetze India Ltd. Vs CCE Bangalore and Sterlite Industries (I) Ltd. Vs CCE Pune, which established that Notification No. 214/86-CE is not an exemption notification per se but merely postpones the duty payment and shifts the liability to the principal manufacturer. Conclusion: The Tribunal concluded that the impugned orders could not be sustained as they went beyond the scope of the SCNs. The Tribunal set aside the impugned order dated 01.12.2014 passed by the Commissioner of Central Excise (Appeals), Chennai, and allowed the appeal with consequential relief as per the law. The Tribunal pronounced the order in the open court on 09.07.2024.
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