2017 (11) TMI 595 - AT - Central Excise

CENVAT credit - job-work - returned inputs - Department s allegation is that in a number of cases the material returned to the customers was not the one which had been received from customers, but was from the stocks of Cenvat credit taken inputs of the appellants - Whether the appellants on return back of such material to the supplier cleared their own raw materials on which Cenvat credit was availed by them and as to whether Cenvat credit involved on such self owned material was liable to be reversed by the appellants under the provisions of Rule 3(4) of Cenvat Credit Rules, 2002/2004? Held that - it is evident that in some cases after receipt of the material on job-work basis, the finished goods could not be produced in the given time span. The materials received on job-work were returned to them (Principal). There is no dispute that such unprocessed inputs were returned, and/or was not received by the respective suppliers - even if the material which had been returned, though maybe from a different lot, by the goods being homogenous, in my view, it does not make any difference. In respect of the material received on job work, which could not be returned and would be used by the appellant for manufacture on their own account, the Cenvat credit would become available, in any case the situation is revenue neutral - except the stock statement of inputs for 14/10/2004, there is no other evidence to show that on each occasion the unprocessed inputs return to the customers were out of the stock of Cenvatable inputs and not inputs which had been received from the customers on job-work. The impugned order is also vitiated for denial of opportunity for cross-examination although prayed by the appellants. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether Cenvat credit availed by the appellants on self-owned raw materials returned to the supplier is liable to be reversed under Rule 3(4) of Cenvat Credit Rules, 2002/2004.

Analysis:
The appeals concern the appellants, who are manufacturers of plastic moulded parts for products like CTVs, washing machines, and refrigerators, which are dutiable. The core issue is whether the appellants, upon returning self-owned raw materials to the supplier, cleared their own raw materials on which Cenvat credit was availed, necessitating reversal under Rule 3(4) of the Cenvat Credit Rules, 2002/2004. The dispute revolves around the nature of materials returned to the supplier and whether they were the same as those received for job work or purchased for the appellants' own manufacturing purposes.

The appellant's position is that the returned raw materials were of the same quality as those received, even if not from the same lot. They argue that there is no conclusive evidence to prove that the materials returned were those purchased for their own account. The appellants maintain that they followed proper procedures for recording material movements and that the revenue's case is based on presumptions without concrete evidence of revenue leakage. The appellant challenges the reliance on the statement of a production manager, emphasizing discrepancies and lack of opportunity for cross-examination.

On the other hand, the revenue contends that the materials returned were those purchased by the appellants for their own manufacturing, leading to a contravention of Cenvat Credit Rules. The revenue asserts that the Cenvat credit taken on such inputs should be reversed as goods were removed without payment. The revenue relies on the findings of the adjudicating authority and legal precedents to support their position.

The Tribunal's analysis acknowledges that some unprocessed inputs were returned to customers, but there is a dispute over whether these were from the appellants' Cenvatable inputs or received for job work. The Tribunal finds that the impugned order lacks evidence to conclusively link returned materials to Cenvatable inputs. Additionally, the denial of the appellants' request for cross-examination is deemed a miscarriage of justice, contrary to legal precedents. Consequently, the appeals are allowed, and the impugned order is set aside, granting the appellants consequential benefits.

In conclusion, the judgment delves into the intricacies of Cenvat credit rules, material movements, evidentiary requirements, and procedural fairness, ultimately ruling in favor of the appellants due to insufficient evidence and procedural lapses in the adjudication process.