2012 (8) TMI 317 - AT - Central Excise

Denial of Cenvat credit - job-worked goods were cleared without payment of duty, to the principal manufacturer, who processed the goods further and cleared the final product on payment of duty Held that - Cenvat credit of duty paid on the inputs used in the manufacture of final product cleared without payment of duty for further utilization in the manufacture of final product, which were cleared on payment of duty by the principal manufacturer, would not be hit by provisions of Rule 57C of erstwhile Central Excise Rules, 1944 - order to the extent it denied the CENVAT credit in question to the assessee is not sustainable - appeal is allowed.

Summary

Issues:
1. Dispute regarding CENVAT credit availed on inputs used for job work.
2. Eligibility of the appellant for CENVAT credit benefit.
3. Interpretation of Rule 6 of CENVAT Credit Rules, 2004.

Analysis:

1. The dispute in the case revolved around the appellant availing CENVAT credit of Rs.2,81,900 on inputs used for job work, where the job-worked goods were cleared without payment of duty to the principal manufacturer. The show-cause notice alleged irregular availment of the credit, leading to the original authority confirming the demand based on the irregularity. The authority cited Rule 6 of CENVAT Credit Rules, 2004, stating that credit on inputs for job work purposes is not eligible. The Commissioner (Appeals) upheld this decision, emphasizing that only a manufacturer or producer of the final product could avail the credit, not the appellant who did not bring the final product into existence.

2. The appellant argued that the issue was covered in their favor by a larger Bench decision in the case of Sterlite Industries (I) Ltd. vs. Commissioner and Sudhir Forging vs. Commissioner, where it was held that credit on inputs used in the manufacture of final products cleared without duty payment for further utilization in the manufacture of final products cleared on duty payment by the principal manufacturer was permissible. The appellant contended that the provisions cited by the lower authorities were similar to those in the larger Bench decision, thus making the decision applicable to their case.

3. After considering the submissions, the tribunal found that the issue was settled in favor of the appellant by the larger Bench decision in Sterlite Industries, where it was clarified that the credit on inputs used in the manufacture of final products cleared without duty payment was permissible. The tribunal noted that the provisions invoked against the appellant were essentially similar to those addressed in the larger Bench decision, making the decision directly applicable to the present case. Consequently, the tribunal held that the denial of CENVAT credit to the appellant was unsustainable, and the appeal was allowed.