2018 (1) TMI 1167 - AT - Central Excise

CENVAT credit - job-work - inputs on which Cenvat Credit had been availed by the Chopanki unit, which were used in the job work carried out by that unit for the Bhiwadi unit - Revenue is of the view that the Chopanki units is required to pay duty on such goods under Rule 3 (5) of the Cenvat Credit Rules - Held that - similar issue had come up before the Tribunal in the against of DCM Engineering Products V/s CCE 2009 (8) TMI 545 - CESTAT, NEW DELHI in which the Tribunal has held that when there is no physical removal of the cenvated inputs, there is no requirement to reverse the credit the credit under Rule 3 (5) ibid - the inputs in the Chopanki unit have been used to carry out job work for the Bhiwadi unit, and such goods have been further used by the Bhiwadi unit for manufacture of final products which have ultimately been cleared on payment of duty. Consequently, there is no justification in raising the demand against the Chopanki unit. CENVAT credit - duty paying documents - stock transfer - Revenue has raised such demand by invoking Rule 9(1) (b) of the CCR 2004, on the ground that this credit had been taken by the Bhiwadi unit on the basis of supplementary invoices issued by the Chopanki unit - Held that - similar issue had come up before the Hon ble Karnatka High Court in the case of Karnataka Soaps and Detergents 2010 (2) TMI 524 - KARNATAKA HIGH COURT , where it was held that the provisions of Rule 9(1)(b) are not applicable in case of stock transferred when there is no sale - demand for reversal set aside. CENVAT credit - demand for reversal against the Bhiwadi unit on the ground that this credit has been taken by that unit on the basis of certain invoices covering use of the cenvated inputs by Chopanki unit in job work for Bhiwadi unit - Revenue is seeking to reverse such credit at the Bhiwadi unit by taking the view that the Chopanki unit was not required to pay any duty - Held that - It is settled position of law that the assessee who is taking the Cenvat credit is entitled to do so once the duty has been paid and goods received even if the duty on the product at the suppliers end is subsequently varied - there is no justification to demand reversal in this case. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Duty demand of ?9.24 crores against the Chopanki unit.
2. Penalty of ?30 lakhs on the Deputy General Manager.
3. Reversal of Cenvat Credit of ?2.01 crores against the Bhiwadi unit.
4. Reversal of Cenvat Credit of ?2.76 crores against the Bhiwadi unit.

Detailed Analysis:

1. Duty Demand of ?9.24 Crores Against the Chopanki Unit:
The primary issue is whether the Chopanki unit is required to reverse the Cenvat Credit for inputs used in job work for the Bhiwadi unit. The appellant contended that since there was no physical removal of inputs, no reversal of Cenvat Credit was necessary, citing judgments in similar cases such as H.V. Axles Ltd. vs. CCE, Jamshedpur and DCM Engineering Products vs. CCE, Jalandhar. The Tribunal agreed, noting that the job work was carried out under proper intimation and challans as per Notification No. 214/86. It concluded that no duty reversal was required as there was no physical removal of inputs, setting aside the demand of ?9.24 crores.

2. Penalty of ?30 Lakhs on the Deputy General Manager:
The penalty imposed on the Deputy General Manager, Shri Pawan Batra, was also set aside. Since the primary duty demand of ?9.24 crores was found unjustified, the associated penalty on the Deputy General Manager was similarly dismissed.

3. Reversal of Cenvat Credit of ?2.01 Crores Against the Bhiwadi Unit:
The Bhiwadi unit took Cenvat Credit based on supplementary invoices issued by the Chopanki unit during the investigation. The department denied this credit, invoking Rule 9(1)(b) of the Cenvat Credit Rules, 2004, alleging deliberate non-reversal by the Chopanki unit. The Tribunal referenced the Karnataka High Court's decision in Karnataka Soaps & Detergents Ltd. vs. CCE, Mysore, which clarified that Rule 9(1)(b) does not apply to stock transfers without sale. Consequently, the Tribunal found the demand for reversal of ?2.01 crores unjustified and set it aside.

4. Reversal of Cenvat Credit of ?2.76 Crores Against the Bhiwadi Unit:
This demand was based on the use of duty-free synthetic rubber by the Chopanki unit in job work for the Bhiwadi unit. The department argued that no duty was required under Rule 3(5) for duty-free inputs, thus invalidating the invoices for Cenvat Credit at the Bhiwadi unit. The Tribunal held that once duty is paid and invoices issued, the receiving unit is entitled to credit, regardless of subsequent variations in duty at the supplier's end. Therefore, the demand for reversal of ?2.76 crores was also set aside.

Conclusion:
The Tribunal set aside all the impugned orders, allowing all four appeals. The duty demands and penalties against the Chopanki unit and the Deputy General Manager were dismissed, and the reversals of Cenvat Credit against the Bhiwadi unit were found unjustified and were annulled.