2022 (1) TMI 395 - HC - Central Excise

Principles of natural justice - credit denied without following the precedential decision passed by it in the Appellant s own case - denial of substantial benefit of credit on the basis of appreciation of incorrect facts which were never set up by the Department in the impugned proceedings - denial of credit even after holding that the Job Worker had no facility to manufacture Crown Corks by using Tin Sheets which were in fact received by the Job Worker for printing and sent back to the Appellant after printing - denial of credit without appreciating the fact that denial of substantial benefit to the Appellant amounts to doubt taxation - invocation of longer period of limitation - HELD THAT - The dispute is relating to the MODVAT credit availed on 88.637 metric tons of Tin Sheets during the period 1991-92 to 1993-94 by the appellant herein. The appellant M/s. ECPL has claimed the MODVAT credit on these inputs. It is not in dispute that these inputs were directly sent to the Job Worker, M/s MCPL for printing and cutting. The Hon ble Apex Court in the case of JAYPEE REWA CEMENT VERSUS COMMISSIONER OF CENTRAL EXCISE, MP 2001 (8) TMI 1332 - SUPREME COURT has held that Rule 57A(1) did not requires inputs to be utilized in factory premises, that the credit is permissible in respect of intermediate goods received from Job Worker. The credit can be allowed only if the intermediate products received by the manufacturer of the said final products are accompanied by any of the documents and it is evidenced that the payment of duty on such inputs of capital goods has been paid. It is significant to note that in the assessee s own case in M/S. EMCEE CROWNS (P) LTD, SHRI MAHESH HEGDE, ACCOUNTS ASSISTANT, SHRI K.S. DILIP, DIRECTOR, SHRI PRASHANTH HEGDE, CHAIRMAN, M/S. METAL CLOSURES (P) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE C.C.E. -BANGALORE-III 2018 (10) TMI 16 - CESTAT BANGALORE , the Tribunal has already decided the issue in favour of the assessee. However, the Tribunal failed to consider the same or to distinguish the said decision of the Tribunal. - in the present case, M/s ECPL no doubt has sent the inputs directly to the Job Worker M/s MCPL, it is an admitted fact that M/s MCPL has no infrastructure availability for manufacture of Crown Corks and the said Tin Sheets after printing and cutting have reached M/s ECPL. If so, merely for the reason that the said diversion of goods directly to the Job Worker was not informed to the department is not a ground for denial of the CENVAT credit. The cryptic order passed on this aspect making bald observations is not in accordance with law and the same cannot be sustained. In the circumstances, denial of credit to the assessee amounts to double taxation. Appeal allowed - decided in favor of assessee.

Summary

Issues Involved:
Challenge to order denying credit under Central Excise Act, 1944.

Analysis:
1. The appellant challenged the order passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Bengaluru, denying credit under the Central Excise Act, 1944. The appellant raised substantial questions of law regarding the denial of credit without following precedential decisions, denial of substantial benefit, and invoking longer limitation periods. The appellant, a private limited company engaged in manufacturing Crown Corks, sent Tin Sheets to a Job Worker for printing and cutting. The authorities alleged clandestine activities, leading to a show-cause notice and subsequent confirmation of proposals. The Tribunal partially allowed appeals but rejected the challenge to denial of MODVAT credit and penalty. The appellant contended that the denial of credit was unjustified, citing precedents and legal provisions.

2. The appellant argued that the Tribunal erred in denying MODVAT credit on Tin Sheets sent to the Job Worker directly. The Hon'ble Apex Court precedent clarified that credit is permissible for intermediate goods received from Job Workers, subject to payment of duty. The appellant's actions were in line with legal requirements, and the denial of credit based on the direct supply to the Job Worker was unjustified. Precedents cited by the appellant supported the position that direct forwarding of inputs to Job Workers does not warrant denial of MODVAT credit. The Tribunal's failure to consider its previous decision in the appellant's favor was highlighted, emphasizing the unjust nature of the denial of credit.

3. The Court analyzed the facts and legal precedents presented by both parties. It noted that the Tin Sheets were sent directly to the Job Worker for processing, and the Job Worker lacked the infrastructure to manufacture Crown Corks. The Tribunal's order lacked valid reasons for confirming the denial of credit, leading to potential double taxation. The Court found the denial of credit unjustifiable, setting aside the Tribunal's order and the penalty imposed. The substantial questions of law were answered in favor of the appellant, emphasizing the importance of adherence to legal principles and precedents in tax matters.

4. In conclusion, the Court allowed the appeal, setting aside the Tribunal's order denying credit under the Central Excise Act, 1944. The original order denying CENVAT credit and imposing a penalty was also overturned. The Court's decision was based on the unjust nature of the denial of credit, lack of valid reasons in the Tribunal's order, and the appellant's compliance with legal requirements. The judgment emphasized the significance of legal precedents and proper application of tax laws in determining the entitlement to credits and benefits under the Central Excise Act, 1944.