Job work credit transfer to Cenvat account was impermissible after rule change, with fresh adjudication required.

Credit kept in a separate job work account under the erstwhile Rule 57F(4) mechanism could not be shifted into the regular Cenvat account after the 1-4-2000 change in law, because the accumulated balance in the parallel account did not retain the character of transferable duty credit. The discussion also notes that no intent to evade duty was established, so suppression had no real bearing on reworking the matter. The matter was to be reconsidered afresh after hearing the appellant, and penalty was not sustainable in the absence of a departmental appeal against its deletion.

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Issues: Whether the amount retained in the separate job work-related account could be transferred to the regular Cenvat credit account and whether recovery could be sustained on the basis of suppression and extended limitation.

Analysis: The credit in question arose from a separate account maintained for job work transactions under the erstwhile Rule 57F(4) of the Central Excise Rules, 1944, where debits and re-credits were made as a percentage of the value of inputs sent to and received from job workers. After the change in law with effect from 1-4-2000, the earlier debit/re-credit mechanism ceased to operate, yet the appellant continued the old procedure in the separate account and later transferred the accumulated balance to the regular RG 23A Part II account. The transfer was held to be impermissible because the amounts in the parallel account did not partake of the character of duty credit capable of being shifted into the regular Cenvat account. At the same time, there was no allegation or finding of intent to evade duty, and the issue of suppression was treated as having no real significance for the limited purpose of reworking the matter correctly.

Conclusion: The transfer of the accumulated amount to the regular Cenvat credit account was not permissible, but the matter required fresh adjudication after giving the appellant an opportunity of hearing, and penalty could not be imposed in the absence of a departmental appeal against its deletion.

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