2015 (10) TMI 842 - AT - Central Excise

Denial of CENVAT Credit - Job work - Held that - Job worker used liquid ammonia supplied by the appellant. The output thereof that came back to the appellant was nitrogen. Both the supply and receipt of the input and finished goods was through pipeline. There is no deviation to that. Once there is no deviation, learned Commissioner (Appeals) should have considered whether the concern which used liquid ammonia of the appellant for manufacture of nitrogen for onward transmission to the appellant was job worker. He has not done that. Had there been consideration the dispute on the allowability of CENVAT credit would have been reduced. There is no contradictory finding in the appellate order. Therefore on that aspect appellant succeeds. Certain tools manufactured by the appellant in its factory were meant for re-use thereof on behalf of their client. Therefore, only an invoice was raised and excise duty was collected from their clients and the duty so collected was paid to Treasury. Such duty paid tools were used for clients. Therefore, there cannot be denial of the CENVAT credit of the duty paid which has legitimately gone to Treasury - no dealing with the pleading resulting in violation of principles of natural justice calls for redressal. Commissioner (Appeals) has recorded no clearance of the tools shall disentitle the appellant to the CENVAT credit. - Decided in favour of assessee.

Issues:
1. Job worker status of the concern using liquid ammonia supplied by the appellant for manufacturing nitrogen.
2. Denial of CENVAT credit for tools manufactured by the appellant for re-use on behalf of clients.
3. Violation of principles of natural justice in the order of the learned Commissioner (Appeals).

Issue 1: Job worker status of the concern using liquid ammonia:
The dispute revolves around the appellant being the principal manufacturer and engaging a job worker who used liquid ammonia supplied by the appellant to produce nitrogen. The output, nitrogen, was then returned to the appellant via pipeline. The contention is that the concern using the liquid ammonia should be considered a job worker, which the learned Commissioner (Appeals) failed to address. The absence of contradictory findings in the appellate order favors the appellant, leading to success on this aspect.

Issue 2: Denial of CENVAT credit for tools manufactured for re-use:
The appellant raised the issue that tools manufactured in their factory were solely for re-use on behalf of clients, with excise duty collected and paid to the Treasury. These duty-paid tools were used for clients, justifying the claim for CENVAT credit. The learned Commissioner (Appeals) did not address the specific pleadings on this matter, resulting in a violation of principles of natural justice. The erroneous order stating that no clearance of the tools disentitles the appellant to CENVAT credit requires correction, granting the appellant the benefit of the doubt.

Issue 3: Violation of principles of natural justice:
The order of the learned Commissioner (Appeals) failed to address the specific pleadings made by the appellant, leading to a violation of principles of natural justice. The absence of consideration for the appellant's arguments resulted in an erroneous conclusion regarding the denial of CENVAT credit for tools meant for re-use. This oversight necessitates redressal to ensure a fair and just outcome for the appellant.

This judgment from the Appellate Tribunal CESTAT CHENNAI addresses multiple issues concerning the job worker status of a concern using liquid ammonia supplied by the appellant, the denial of CENVAT credit for tools manufactured for re-use, and the violation of principles of natural justice in the order of the learned Commissioner (Appeals). The appellant succeeded in establishing the job worker status of the concern using liquid ammonia, leading to a favorable outcome on this aspect. Additionally, the appellant's claim for CENVAT credit for tools meant for re-use was justified, emphasizing the need for a fair consideration of all relevant pleadings. The failure to address specific arguments by the appellant resulted in a violation of natural justice, necessitating a corrective action to rectify the erroneous order.

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