CENVAT credit reversal for job work was unsustainable where goods returned within 180 days and no payment was shown.

CENVAT credit reversal was held to be unwarranted where coating powder and metal parts were sent to a job worker, the debit note was issued only for accounting purposes, no payment was received from the job worker, and the goods were returned within 180 days under Rule 4(5)(a) of the CENVAT Credit Rules, 2004. The department relied on an assumption of supply on payment, but the record included the job worker's confirmation that no charges were paid and no contrary verification was produced. On that factual basis, no breach of the CENVAT Credit Rules was established and the demand was set aside.

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Issues: Whether the demand for reversal of CENVAT credit was sustainable where the coating powder was sent to the job worker, no payment was received from the job worker, and the goods were returned within the prescribed period under the CENVAT Credit Rules, 2004.

Analysis: The department proceeded on the assumption that the coating powder was supplied to the job worker on payment and that credit was therefore required to be reversed. The record showed that the debit note was issued only for accounting purposes, that no charges were received from the job worker, and that the job worker also confirmed that no payment had been made. The metal parts sent for job work were returned within 180 days as required under Rule 4(5)(a) of the CENVAT Credit Rules, 2004. In the absence of any verification or contrary evidence from the department, no violation of the CENVAT Credit Rules was established.

Conclusion: The demand was unsustainable and the impugned order was set aside. The appeal was allowed.

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