2018 (5) TMI 654 - AT - Central Excise

CENVAT credit - inputs procured by the appellant as a job worker and consumed for manufacturing of items under job work basis and clearance of the same to principal manufacturer - Held that - law is well settled by the Larger Bench decision of the Tribunal in the case of Sterlite Industries (I) Limited 2004 (12) TMI 108 - CESTAT, MUMBAI , where it was held that Modvat credit of duty paid on the inputs used in the manufacture of final product cleared without payment of duty for further utilisation in the manufacture of final product, which are cleared on payment of duty by the principal manufacturer, would not be hit by provision of Rule 57C - demand not sustainable. CENVAT credit - health insurance for the employees - Held that - for the period in question, the law is settled in the case of Stanzen Toyotetsu India (P) Limited 2011 (4) TMI 201 - KARNATAKA HIGH COURT , wherein the Hon ble High Court stated that CENVAT credit cannot be denied of the service tax paid on health insurance services - credit allowed. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Reversal of cenvat credit on inputs used in job work
2. Availment of cenvat credit on service tax paid for health insurance

Analysis:

Issue 1: Reversal of cenvat credit on inputs used in job work
The appeal was against Order-in-Appeal No. 71/2011 regarding the demand for reversal of cenvat credit on inputs used in job work. The appellant, functioning as a job worker for a company, procured materials and availed cenvat credit on excise duty paid by the company/vendors. The dispute arose as the job worked material was removed without payment of central excise duty. The Tribunal referred to the Larger Bench decision in the case of Sterlite Industries (I) Limited, which clarified that the job worker could avail cenvat credit and clear processed goods to the principal manufacturer. The Tribunal, following this ratio and various decisions, held that the demand by the adjudicating authority was unsustainable, setting it aside.

Issue 2: Availment of cenvat credit on service tax paid for health insurance
Regarding the cenvat credit availed on service tax paid for health insurance for employees during 2005-06 to 2006-07, the Tribunal relied on judgments of the Hon’ble High Court of Karnataka in the cases of Stanzen Toyotetsu India (P) Limited and Micro Labs Limited. These judgments established that cenvat credit cannot be denied on service tax paid for health insurance services. Consequently, the Tribunal held that the impugned order on this account was also unsustainable. Therefore, the Tribunal set aside the impugned order and allowed the appeal based on the settled law and precedents cited.

In conclusion, the Appellate Tribunal CESTAT Hyderabad, comprising Member (Judicial) and Member (Technical), ruled in favor of the appellant on both issues - reversal of cenvat credit on inputs used in job work and availment of cenvat credit on service tax paid for health insurance. The Tribunal set aside the impugned order, emphasizing the settled legal principles and judgments cited during the proceedings.