2015 (12) TMI 1563 - AT - Central Excise

Appeal allowed due to zinc exhaustion in galvanization process, overturning prior decision.

The appeal was allowed based on the established exhaustion of the zinc in the galvanization process, overturning the previous decision and confirming the ... CENVAT credit recovery for inputs not returned after job work - evidentiary sufficiency for proving consumption in job work - application of Rule 5(a) of the CENVAT Credit Rules, 2004 in job work casesCENVAT credit recovery for inputs not returned after job work - evidentiary sufficiency for proving consumption in job work - application of Rule 5(a) of the CENVAT Credit Rules, 2004 in job work cases - Whether the zinc sent to the job worker under challan Nos. 16 and 19 was consumed in the galvanizing process so as to absolve the appellant from liability to repay CENVAT credit - HELD THAT: - The Tribunal examined the challans and endorsements furnished by the appellant. Challan No. 12 records dispatch of 200 steel channels/sleepers for galvanizing and an endorsement on return dated 31/07/2007 showing completion of galvanization by the same job worker (M/s. Standard Galvanizing) to whom the zinc was sent under challan Nos. 16 and 19. A comparison of the nature of processes described in challans 12, 16 and 19 showed that the processes were integrally connected (galvanizing of steel channels/sleepers) and that the zinc forwarded against challan Nos. 16 and 19 was necessarily consumed in the galvanizing of the 200 pieces returned under challan No. 12. The Tribunal found that these records constituted sufficient evidence to establish exhaustion/consumption of the input zinc in job work and hence rebutted the demand founded on non return of inputs under Rule 5(a) of the CENVAT Credit Rules, 2004. The Tribunal therefore concluded that the adjudicating authority and the Commissioner (Appeals) erred in holding that the appellant failed to prove return of the inputs.Impugned demand and penalty set aside; appeal allowed.Final Conclusion: On the material on record (challans and endorsements), the Tribunal held that the zinc sent for job work was consumed in the galvanizing of the returned steel channels; the demand and penalty were therefore set aside and the appeal allowed. Issues:- Demand of CENVAT Credit availed on zinc not returned after processing within 180 days.- Appeal against Order-in-Appeal No. 14/HAL/2012 confirming the demand and imposing penalty.- Dispute regarding whether zinc sent for galvanization was used by the job worker.- Lack of sufficient evidence establishing the return of zinc cleared for job work.Analysis:The appeal was filed against an Order-in-Appeal confirming the demand for CENVAT Credit availed on zinc not returned within 180 days after processing. The appellant, a manufacturer of Railway Track and Round, sent zinc for job work to a job worker, alleging that the zinc was exhausted in the galvanization process and could not be returned. The Ld. Commissioner (Appeals) rejected the appeal due to insufficient evidence of zinc return. The central issue was whether the zinc sent for galvanization was used by the job worker, as claimed by the appellant.During the proceedings, the appellant's advocate argued that the zinc sent for galvanization was indeed exhausted in the process, as the galvanized steel channels were returned after processing. The Revenue's representative supported the Ld. Commissioner (Appeals)'s findings, emphasizing the lack of evidence regarding zinc return. After hearing both sides and examining the records, the judge concluded that the zinc sent for galvanization was indeed used up in the process, as evidenced by the return of galvanized steel channels and the nature of processes mentioned in the challans.The judge noted that the zinc sent against specific challans was exhausted in galvanizing the steel channels, as indicated by the return of processed goods and the nature of processes mentioned in the relevant documents. Consequently, the judge set aside the impugned order, allowing the appeal and providing for any consequential relief as per the law. The appeal was thus allowed based on the established exhaustion of the zinc in the galvanization process, overturning the previous decision and confirming the appellant's position.