2015 (10) TMI 1057 - AT - Central Excise

Denial of MODVAT Credit - benefit of exemption under Notification No 214/86-CE dtd 25.3.1986 - Held that - Adjudicating authority passed the order following the decision of the Tribunal in the case of Bright Steel Mac Fabrics Vs CCE, Ahmedabad - 1993 (9) TMI 218 - CEGAT, NEW DELHI where it has been held that the job worker cannot be compelled to follow the option under Notification No. 214/86 CE dtd 25.3.1986 and it is for the job worker to return the processed goods on payment of duty. The said decision was upheld by the Hon ble Supreme Court as reported in 1996 (3) TMI 532 - SUPREME COURT . We have also noticed that the Tribunal in a recent decision in the case of M/s Thermax Ltd Vs CCE, Vadodara by 2014 (9) TMI 809 - CESTAT AHMEDABAD allowed the appeal on the identical issue. In that case, the Tribunal followed the earlier decision in the case of M/s Bharat Heavy Electricals Ltd Vs CCE&ST Meerut 1 - 2014(3) TMI 203 - CESTAT, New Delhi . - Decided against Revenue.

Summary

Issues:
Appeal against dropping of proceedings on Show Cause Notice for denial of Modvat Credit on intermediate goods supplied by job worker.

Analysis:
The appeal was filed by the Revenue against the Order of the Commissioner where proceedings initiated on a Show Cause Notice were dropped. The respondent, engaged in manufacturing chemicals, supplied material to a job worker under Rule 57F(3) of the Central Excise Rule 1944. The job worker processed the material and returned it to the respondent on payment of duty under invoice, with the respondent availing Modvat Credit based on the job worker's invoice. The issue in the impugned Show Cause Notice was to deny Modvat Credit on intermediate goods supplied by the job worker from March 1993 to July 1996.

The Adjudicating authority's decision was based on the Tribunal's ruling in Bright Steel Mac Fabrics case, where it was held that the job worker cannot be compelled to follow the exemption option under Notification No. 214/86 CE. This decision was upheld by the Supreme Court. Additionally, a recent decision in the case of M/s Thermax Ltd allowed the appeal on a similar issue, following the decision in the case of M/s Bharat Heavy Electricals Ltd. The Rule 4(5)(a) of the Cenvat Credit Rules, 2004 allows a manufacturer to send inputs to a job worker for processing without reversal of credit, provided the processed inputs are returned within a specified period. There is no condition that the job worker must avail full duty exemption under Notification No. 214/86-C.E. The Department sought to deny Cenvat credit on the ground that credit cannot be availed twice on the same inputs, but this argument was deemed incorrect.

Based on the above analysis, the Tribunal found no reason to interfere with the Adjudicating Authority's order and rejected the Revenue's appeal.