2015 (10) TMI 132 - AT - Central Excise

Denial of CENVAT Credit - Demand on the ground that appellant has placed purchase order to M/s. Nowrangroy Rameshwar to supply aluminium sheets/coils to be delivered directly to M/s. National Wire Netting Agency and taken the Cenvat credit on the invoices issued by M/s. Nowrangroy Rameshwar which is not correct - Held that - Rates quoted on subject invoices are of job work charges only, although the job worker has paid the VAT thereon. For that, it cannot be concluded that the goods have been sold by the job worker to the appellant. The contention of the appellant that they have sent the goods to the job worker for further processing, if the goods have been processed by the job worker, then the shapes of the inputs received by the job worker would definitely go to a change and the manufactured goods will be a distinct product. - under Notification 214/86 the job worker is required to intimate the department that they are undertaking the activity of job worker and not required to pay duty but that fact has also been not verified by the department - appellant has purchased the goods from the supplier of the goods and sent directly to the job work purpose to the job workers which has been received by them after job work, the appellant is entitled to take Cenvat credit. Consequently the impugned order is set aside. - Decided in favour of assessee.

Summary

Issues:
Denial of Cenvat credit based on invoices received, Failure to establish nexus between goods sent for processing and goods received back, Invocation of limitation period for demand of duty.

Analysis:
1. Denial of Cenvat Credit: The appellant appealed against the denial of Cenvat credit based on the premise that they received invoices but not the goods. The appellant, a manufacturer of air cooling plant, purchased aluminum sheets/coils from a supplier for conversion into aluminum mesh/jali by a job worker. The appellant availed Cenvat credit based on these invoices. However, an audit revealed discrepancies, leading to a show cause notice denying Cenvat credit, demanding duty, interest, and imposing penalties. The appellant contended that they sent goods directly to the job worker for processing under Rule 4(5)(A) of the Cenvat Credit Rules, 2004, and therefore, Cenvat credit should not be denied.

2. Establishing Nexus between Goods Sent and Received: The appellant argued that they correctly availed Cenvat credit as the goods were sent for processing and received back after conversion by the job worker. The invoices issued by the job worker showed VAT on job work charges, indicating the processing of goods. The appellant emphasized that the job worker's invoices detailed job work charges, not the price of goods, supporting their claim. Additionally, the appellant challenged the limitation period for the demand of duty, citing a Tribunal case upheld by the High Court.

3. Verification and Nexus Confirmation: The opposing argument highlighted the failure to establish a nexus between the goods sent for processing and those received back. The appellant did not correlate the goods sent in sheets and weight with the unit form in which they were received back. It was questioned whether all goods sent were returned within the specified period under Rule 4(5)(A). The absence of an audit report hindered the verification process, justifying the invocation of the limitation period for the demand.

4. Judgment and Conclusion: Upon review, the Tribunal found that the appellant directed the supplier to deliver goods directly to the job worker for processing, with invoices raised in the appellant's name. The Tribunal noted that the job worker's invoices reflected job work charges, not sale of goods to the appellant. It was emphasized that processed goods would result in a distinct product, supporting the appellant's claim of sending goods for further processing. The Tribunal criticized the lack of verification by the Revenue and ruled in favor of the appellant, allowing them to take Cenvat credit and setting aside the impugned order. The appeal was allowed with consequential relief.

In conclusion, the Tribunal's judgment favored the appellant, emphasizing the direct delivery of goods for processing and the lack of verification by the Revenue to establish a nexus between goods sent and received. The decision highlighted the importance of following procedural requirements and verifying facts before denying Cenvat credit.