2018 (8) TMI 351 - AT - Central Excise

CENVAT Credit (entitlement to principal manufacturer) - Job-work - non-receipt of inputs by principal-manufacturer - denial on the ground that the inputs in question were not physically received by the principal manufacturer i.e. DSM Sinochem Pharmaceuticals India Pvt Ltd - Held that - Although the job workers have issued the invoices with regard to the inputs in question which have been used by the job workers for processing the job worked goods and received thereof by the principal manufacturer. The said challan has not been disputed that the same is fake - after examining the said document, although there may be a procedural lapse on the part of the principal manufacturer, but it cannot be denied the inputs in question were not used in process of job worked goods by the job workers. In these circumstances, whatever inputs used in manufacturing of final product is entitled Cenvat credit to the principal manufacturer. The adjudicating authority has fell in error by holding that the job workers are clearing finished goods to the principal manufacturer, in fact as per the Annexure-I and the challan, the job workers are clearing the job work goods namely 6-APA Crude and the principal manufacturer is clearing the said goods in Refined form - Therefore, it is a factual error on the part of the adjudicating authority holding that the job workers are clearing finished goods to the principal manufacturer. The principal manufacturer is entitled to avail the Cenvat credit on the inputs in question and no penalty is imposable on the appellants - appeal allowed - decided in favor of appellant.

Summary

Issues:
Denial of Cenvat credit on inputs procured by job workers, Allegation of inputs not physically received by principal manufacturer, Penalties imposed on all appellants.

Analysis:
The appellants appealed against an order denying Cenvat credit on inputs procured by job workers for manufacturing goods for the principal manufacturer. The denial was based on the allegation that the inputs were not physically received by the principal manufacturer, leading to penalties on all appellants. The principal manufacturer, a pharmaceutical company, procured inputs in their factory, with some going directly to job workers. An investigation alleged that inputs procured by job workers were not physically received by the principal manufacturer, leading to the denial of Cenvat credit and penalties. The appellants contended that as long as inputs were used in manufacturing, Cenvat credit should be allowed, citing relevant tribunal and apex court judgments.

The advocate for the appellants argued that Rule 3 of Cenvat Credit Rules allows Cenvat credit for inputs used in manufacturing final products, regardless of physical receipt by the principal manufacturer. The advocate referenced tribunal and apex court judgments supporting this interpretation. On the other hand, the respondent's representative argued that the job workers cleared finished goods to the principal manufacturer without physically receiving the inputs, citing discrepancies in challans and invoices.

After hearing both parties, the tribunal examined crucial documents, including challans, to determine if inputs were used in manufacturing. The tribunal noted that although there were procedural lapses, the inputs were indeed used in the manufacturing process. Referring to Rule 3 of Cenvat Credit Rules and previous tribunal decisions, the tribunal upheld the appellants' argument that the principal manufacturer was entitled to Cenvat credit for the inputs in question. The tribunal found no evidence that the inputs were not used in manufacturing, overturning the denial of Cenvat credit and penalties.

In conclusion, the tribunal ruled in favor of the appellants, allowing the Cenvat credit on inputs procured by job workers for manufacturing goods for the principal manufacturer. The tribunal emphasized the importance of Rule 3 of Cenvat Credit Rules and previous legal precedents supporting the allowance of Cenvat credit for inputs used in manufacturing, even if not physically received by the principal manufacturer. The impugned order denying Cenvat credit and imposing penalties was set aside, granting the appellants relief.