2023 (3) TMI 1170 - HC - Central Excise

Recovery of CENVAT Credit - availing double CENVAT credit - Once paid on import / based on BE and second paid by Job-Worker on the same inputs - CVD on imported raw materials directly sent to the job worker in terms of Notification No. 214/86-CE dated 25.3.1986 - interpretation of Rule 3 of CENVAT Credit Rules 2004 - HELD THAT - On a conjoint reading of Rule 3(1) and Rule 4(5)(a) of the CENVAT Credit Rules 2004 it is clear that an assessee can avail CENVAT credit of CVD paid on inputs duly imported by him and also can take credit of duty paid on inputs/capital goods even though inputs are used by the job worker for executing a job work. In case the job worker opts to pay excise duty despite having exemption (Notification No. 214/86) the supplier can also take credit of duty paid by the job worker. In the case in hand it is not in dispute that the job worker was liable to pay duty if he did not avail the benefit of Notification No. 214/86 as the intermediate product manufactured by them was dutiable and availment of Notification No.214/86 is not mandatory. Thus the respondent had correctly taken the credit of the duty paid by the job worker and they are also entitled to CENVAT credit of CVD paid on such inputs. It is a case of double payment of duty on same inputs. The payment of duty twice is not disputed thus it would be unfair and against the scheme of CENVAT to deny credit of said duty. This aspect has already been considered by the High Court of Gujarat in COMMR. OF C. EX. AHMEDABAD-I VERSUS ROHAN DYES INTERMEDIATED LTD. 2013 (4) TMI 277 - GUJARAT HIGH COURT where it was held that the CENVAT credit is admissible to principal manufacture of the duty paid by the job worker even if the credit was availed earlier on receiving the inputs specifically when it is not disputed that the job worker had not taken any credit in respect of inputs imported by the respondent. There are no substantial question of law arises out of the present appeal - appeal dismissed.

Summary

Issues Involved:
1. Whether the decision of the Tribunal was justified to allow the CENVAT credit of duty paid (CVD) on imported raw materials directly sent to the job worker in terms of Notification No. 214/86-CE dated 25.3.1986 to the Respondent.
2. Whether the Tribunal has erred in interpreting Rule 3 of CENVAT Credit Rules, 2004.
3. Whether the order passed by the Tribunal is legal, correct, and proper with respect to the provisions of Law/Rules.

Summary of Judgment:

Issue 1: Justification of Allowing CENVAT Credit
The Tribunal allowed CENVAT credit of duty paid on imported raw materials sent directly to the job worker under Notification No. 214/86-CE. The High Court upheld this decision, noting that the respondent correctly took credit of the duty paid by the job worker and was entitled to CENVAT credit of CVD paid on such inputs. The Court emphasized that the job worker was liable to pay duty if they did not avail the benefit of Notification No. 214/86, and the payment of duty twice on the same inputs was not disputed. Thus, denying credit of said duty would be against the scheme of CENVAT.

Issue 2: Interpretation of Rule 3 of CENVAT Credit Rules, 2004
The High Court analyzed Rule 3(1) of the CENVAT Credit Rules, 2004, which allows a manufacturer to take credit of duty paid on inputs used in the manufacture of final products, including inputs used by a job worker. The Court concluded that the respondent's action of taking credit on both the imported raw materials and the duty paid by the job worker was in accordance with the law. The Court referenced the judgment in "CCE, Ahmedabad-I vs Rohan Dyes & Intermediated Ltd.," which supported the principle that credit can be taken on inputs supplied to the job worker and the duty paid by the job worker.

Issue 3: Legality and Correctness of the Tribunal's Order
The High Court found no infirmity or perversity in the Tribunal's order. It concluded that the Tribunal rightly applied the legal principles and allowed the respondent to take CENVAT credit. The Court dismissed the appeal, stating that no substantial question of law arose from the dispute, and the Tribunal's judgment was free from any legal errors.

Conclusion:
The High Court dismissed the appeal filed by the Revenue, upholding the Tribunal's decision to allow the respondent to take CENVAT credit on both the imported raw materials and the duty paid by the job worker. The Court found that the Tribunal correctly interpreted the relevant rules and legal principles, and there was no substantial question of law warranting interference in the Tribunal's judgment.