2016 (3) TMI 399 - AT - Central Excise

Inadmissibility of CENVAT credit availed on Colchester CNC crane - central excise duty demand under Section 11A along with interest and equal amount of penalty - contention of Revenue that Colchester CNC machine was used exclusively for job work and therefore CENVAT credit of duty paid thereon was not admissible - Held that - The supplier of the crane, i.e., the sister unit of the appellant was required to pay an amount equal to credit availed in respect of the capital goods, (namely, crane in this case) when removed from the factory as such, i.e., as capital goods. Once the duty paid on the crane was shown in the invoice, the appellant was entitled to take the credit thereof. If it is contended by Revenue that duty was paid in excess, then that issue is to be taken up with the supplying unit by the concerned authority having jurisdiction over the supplying unit and it is not open to the central excise authority having jurisdiction over the appellant to question the correctness of duty paid by the supplier-unit; the receiving unit was entitled to take credit of duty shown in the invoice. Incidentally, CBEC Circular No.877/15/2008-CX, dated 17.11.2008 is supportive of this view. The appellant has clearly stated that the machine was used in its manufacturing unit. The balance-sheet figures show not only the charges received for use of the machine for job work, but also the value of dutiable goods manufactured by it. Even if initially the said machine was used only for job work, the fact is that the appellant used the said machine for manufacture of dutiable goods also, as reflected from the balance sheet for the year 2006-07 in which besides job charges, sales figures of goods manufactured are also shown. Resultantly, do not find sufficient support to sustain the allegation of inadmissibility of CENVAT credit availed on Colchester CNC crane. The said short payment has been worked out on the basis of scrap which would have likely generated. It obviously shows that the short-levy has been worked out by assuming certain quantity of scrap likely generated without any evidence that that quantity of scrap was actually generated. Thus, the said demand is based on assumption and presumption and hence is clearly unsustainable. - Decided in favour of assessee

Summary

Issues:
1. Disallowance of CENVAT credit and central excise duty demand.
2. Denial of CENVAT credit on machinery used for job work.
3. Alleged short payment of duty on scrap generated.

Analysis:

Issue 1: Disallowance of CENVAT credit and central excise duty demand
The appeal was filed against an Order-in-Appeal upholding an Order-in-Original disallowing CENVAT credit of Rs. 4,77,608 and confirming central excise duty demand of Rs. 6,389 along with interest and penalty. The appellant received a crane from its sister unit with a depreciated value but claimed excess CENVAT credit. The Revenue contended that the credit should be restricted to the duty payable on the depreciated value. The appellant also faced allegations of short payment of duty on scrap generated. The Tribunal noted that the appellant was entitled to take credit based on the duty shown in the invoice, and any issues regarding excess duty payment should be addressed with the supplying unit. The demand for duty on scrap was deemed unsustainable as it was based on assumptions without evidence.

Issue 2: Denial of CENVAT credit on machinery used for job work
The Revenue argued that CENVAT credit on a CNC machine used exclusively for job work was inadmissible. However, the appellant asserted that the machine was also used for manufacturing dutiable goods, as reflected in their balance sheet. The Tribunal found merit in the appellant's claim, noting that the machine was indeed utilized for manufacturing dutiable goods, as evidenced by the balance sheet figures. Consequently, the denial of CENVAT credit on the CNC machine was deemed unjustified.

Issue 3: Alleged short payment of duty on scrap generated
The duty demand related to scrap generated was based on assumed quantities without concrete evidence of actual generation. The Tribunal observed that the short-levy was calculated on presumptions, making the demand unsustainable. As there was no evidence to support the quantity of scrap actually generated, the demand was considered invalid. Therefore, the impugned order disallowing the CENVAT credit and confirming the duty demand was set aside, and the appeal was allowed.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing their entitlement to CENVAT credit based on invoice details and rejecting the unsustainable demands made by the Revenue.