2014 (8) TMI 496 - AT - Central Excise

CENVAT Credit on goods procured by the Job worker - allegation that there is no job-working activity undertaken by the vendors as defined under Rule 2(n) of the said Rules - allegation that there is no actual receipt of inputs / goods - Held that - Once the finished product has correctly discharged the liability there cannot be any leakage of revenue. Cenvat Credit envisages that duty/tax paid on the input/input services will be available for discharge of duty liability on the finished products. It is not in dispute that the inputs were used in the fabrication / assembly of the finished products. Similarly, it is also not in dispute that finished products did emerge at the job-workers premises. In these circumstances, the conclusion drawn by the adjudicating authority that there is no job work involved in the present case is a contradiction in terms. A job work might amount to manufacture or might not amount to manufacture . In many instances the job work results in production of a new commodity. For example, in the case of textile fabrics, a job-worker undertaking the process of bleaching or dyeing of fabrics, new products namely, dyed/bleached fabrics come into existence. Thus, the activities amount manufacture . Similarly, in the case of a bus body built on a chassis, the activity amounts to manufacture . Therefore, it cannot be said that since the activities undertaken result in a new commodity, there is no job-work involved - appellant has made out a strong prima facie case for grant of stay. Accordingly, we grant unconditional waiver from pre-deposit of the dues adjudged against the appellant and stay recovery thereof during the pendency of the appeal - Stay granted.

Summary

Issues:
- Duty demand confirmation against the appellant
- Contradiction in findings regarding job-working activity
- Cenvat Credit availed without receipt of goods in the appellant's premises
- Violation of Cenvat Credit Scheme
- Whether the activities amount to job-work or manufacture

Issue 1: Duty demand confirmation against the appellant

The appeal and stay petition were directed against the Order-in-Original confirming a duty demand of Rs. 5,08,93,978 against the appellant, M/s. Eaton Fluid Power Ltd., along with interest and penalty. The appellant contended that they are manufacturers of various products and had undertaken processing of components sent to job-workers for fabrication. The Revenue alleged discrepancies in the job-working activity and duty liability. The appellant argued that duty on finished products was discharged correctly, and there was no revenue leakage.

Issue 2: Contradiction in findings regarding job-working activity

The appellant argued that the job-working activity undertaken by vendors constituted "manufacture" as per Section 2(f) of the Central Excise Act. They contended that the findings of the adjudicating authority were contradictory, as the Revenue accepted duty liability discharge on completed products but questioned the job-working activity. The Tribunal noted that job work may result in new products, thus constituting manufacture.

Issue 3: Cenvat Credit availed without receipt of goods in the appellant's premises

The Revenue alleged that the appellant took Cenvat Credit without receiving inputs in their factory, violating the Cenvat Credit Scheme. The appellant argued that the value of goods used by job-workers was included in the finished products' value sold from the job-workers' premises, entitling them to credit. They cited relevant decisions supporting their entitlement to credit even without physical receipt of inputs.

Issue 4: Violation of Cenvat Credit Scheme

The Revenue contended that the appellant violated the Cenvat Credit Scheme by taking credit for inputs received by vendors. The Tribunal observed that the Cenvat Credit Rules did not explicitly address situations where materials were directly received by job-workers. However, Rule 4(5)(a) implied such provisions, allowing credit if inputs were used in manufacturing and duty was discharged correctly.

Issue 5: Whether the activities amount to job-work or manufacture

The Tribunal analyzed whether the activities undertaken by the appellant constituted job-work or manufacture. It concluded that the job-working activities resulting in new products could still be considered job-work. The Tribunal emphasized that as long as inputs were used in manufacturing finished products and duty was discharged correctly, denial of Cenvat Credit solely based on non-receipt of inputs at the appellant's factory was unjustified.

In conclusion, the Tribunal granted an unconditional waiver from pre-deposit of the dues adjudged against the appellant and stayed the recovery during the appeal, considering the appellant's strong prima facie case.