2009 (9) TMI 458 - AT - Central Excise

Cenvat Credit- Inputs- The appellant manufacture rough steel forging for themselves as well as for a principal manufacturer on job work basis. In case of manufacture of rough steel forgings on job work basis, they received the inputs-alloy steel rounds, from the principal manufacturer, but they used their own furnace oil, RFO and LDO for which they took Cenvat credit. The rough steel forgings manufactured on job work were cleared to the principal Manufacturer without payment of duty under Notification No. 214/86-C.E. and the principal manufacturer thereafter cleared the finished goods on payment of duty. The point of dispute is as to whether in such a situation, the appellant is eligible for Cenvat credit of duty on LDO, Furnace Oil and RFO. The Asstt. Commissioner holding that they would not be eligible for Cenvat credit of duty on LDO, Furnace Oil and RFO, confirmed Cenvat credit demand alongwith interest and imposed the penalty. The Commissioner (Appeals) vide impugned order-in-appeal upheld the Asstt. Commissioner s order. It is against this order that the present appeal has been filed by the appellant. Held that- Just because the appellant in addition to manufacture of rough forgings on job work basis, also manufactured the rough forging for themselves, they do not cease to the job worker and therefore, I hold that the ratio of the Tribunal s judgment in the case of Sterlite Industries (I) Ltd. v. CCE is squarely applicable to this case. In view of this, the impugned order is not correct and the same is set aside. The appeal is allowed.

Summary

Issues:
Eligibility for Cenvat credit of duty on LDO, Furnace Oil, and RFO used in manufacturing rough steel forgings on job work basis.

Analysis:
The appellant manufactured rough steel forgings for themselves and a principal manufacturer on a job work basis, using their own furnace oil, RFO, and LDO. The rough steel forgings were cleared to the principal manufacturer without payment of duty under Notification No. 214/86-C.E. The dispute centered around the eligibility of the appellant for Cenvat credit on LDO, Furnace Oil, and RFO. The Asstt. Commissioner and the Commissioner (Appeals) held that the appellant was not eligible for such credit, leading to a Cenvat credit demand, interest, and a penalty.

The appellant argued that the issue had been settled in their favor by a Larger Bench judgment of the Tribunal in a previous case. They cited various cases supporting their position, emphasizing that the Tribunal's judgment was based on Supreme Court precedents. The appellant contended that since the issue was already decided in their favor, the impugned order was incorrect.

The Respondent, however, argued that the appellant's situation did not qualify them as a job worker, as they also manufactured goods for themselves. They highlighted the need to reverse proportionate credit for rough steel forgings cleared at nil rate of duty. The Respondent pointed out that the cited judgments were pre-Notification No. 27/05-C.E., which altered the treatment of fuel inputs under Rule 6(2). They also noted that the appellant had already paid a portion of the disputed amount, indicating acknowledgment of their ineligibility for the credit.

Upon review, the Tribunal found that the issue was settled in the appellant's favor by the Larger Bench judgment, which had been confirmed by the Hon'ble Mumbai High Court. The Tribunal clarified that the appellant's additional manufacturing activities did not disqualify them as a job worker. Therefore, the Tribunal set aside the impugned order, ruling in favor of the appellant and allowing the appeal.

This comprehensive analysis of the judgment highlights the key arguments presented by both parties, the legal precedents cited, and the Tribunal's reasoning in arriving at the decision to allow the appeal.