2016 (1) TMI 381 - AT - Central Excise

Denial of refund claim - job worker and erroneously paid duty on clearance of job work material - Held that - CENVAT Credit shall be allowed even if inputs or capital goods sent to job worker for further processing, testing, repair etc. for the manufacture of intermediate goods necessary for the manufacture of final product, and it is established from the records that the goods are received back in the factory within the stipulated period. So, Rule 4(5)(a) of the Rules permitted the manufacturer to send the inputs or capital goods to the job workers without reversal of CENVAT Credit. - Tribunal observed that the duty liability has been discharged by the supplier of the raw material and not by the job worker or processor of the goods and the demand on job worker is unsustainable. Assessee received the MMF for processing and after processing sent to the Principal, which is used in the manufacture of final product. In the present case, the fermenters/columns supplied by the Appellant were admittedly not used in the manufacture of final product viz. pharmaceuticals or chemicals. - decided against Assessee.

Summary

Issues: Refund claim under Rule 4(5)(a) of CENVAT Credit Rules, 2004 for job work material not used in final product manufacture.

Analysis:
1. Facts and Background: The case involved the Appellants engaged in manufacturing Machinery under Chapter 84 of the Central Excise Tariff Act, 1985. They received Iron and Steel articles for manufacturing Fermenters/Columns on a job work basis and filed a refund claim of Rs. 39,30,563.00, contending that duty was erroneously paid on the job work material clearance to the principal.

2. Appellant's Argument: The Appellant argued that they received material under Rule 4(5)(a) of CENVAT Credit Rules, 2004, and returned the goods to the principal for use as capital goods within their factory. They claimed no duty was payable on the job work material cleared to the principal under this rule. The Appellant cited previous Tribunal decisions to support their stance.

3. Revenue's Argument: The Revenue reiterated the findings of the Commissioner (Appeals), stating that Rule 4(5)(a) requires goods to be used in the manufacture of the final product, which was not the case with the Appellant's job work material.

4. Judgment: The Tribunal analyzed Rule 4(5)(a) and emphasized that CENVAT Credit is allowed if inputs or capital goods are sent to a job worker for further processing, testing, or for manufacturing intermediate goods necessary for the final product. The Tribunal noted that the job work material in question was not used in the manufacture of the principal's final product, pharmaceuticals, or chemicals. Therefore, the Appellant was not entitled to the refund claim.

5. Precedents and Case Law: The Appellant cited case laws where job work material was used in the manufacture of the final product, leading to a different outcome. However, the Tribunal differentiated the present case where the job work material was not utilized in the production of the final product, making those precedents inapplicable.

6. Conclusion: After considering both parties' arguments and the relevant legal provisions, the Tribunal found no merit in the appeal filed by the Appellant and rejected the appeal. The decision was based on the interpretation of Rule 4(5)(a) and the specific circumstances of the case where the job work material did not contribute to the manufacture of the final product as required by the rule.