2013 (11) TMI 992 - AT - Central Excise

Tribunal allows cenvat credit on capital goods for job work

The Tribunal ruled in favor of the appellant, allowing cenvat credit on capital goods sent directly to job work despite not being received in the factory. ... Admissibility of cenvat credit under Rule 4(5)(b) of Cenvat Credit Rules 2002 – the requirement is to take cenvat credit on the basis of duty paying documents – Held that:- The dies were lying with the job worker since 1980 and at that point of time, the credit of duty paid on the capital goods was not admissible as cenvat credit and there was no procedure requiring dies to be transferred to job worker under challan or by following any procedure under Central Excise Law – The problem has arisen because respondents chose the option and it is only a procedural irregularity - capital goods are used by the job worker for the respondents and they are eligible to send the same - the stand taken by the Commissioner (Appeals) that extended period cannot be invoked does not need to be interfered with – Relying upon CCE, Pondicherry vs. Chemplast Sanmar Ltd. [2004 (12) TMI 125 - CESTAT, CHENNAI] - duty paid by the job worker on repair charges is admissible as far as admissibility of credit on the repair charges is concerned - on merits as well as on limitation – Decided against Revenue. Issues:Admissibility of cenvat credit on capital goods not received in the factory and directly sent to job work; Limitation period for invoking extended period.Analysis:Admissibility of Cenvat Credit on Capital Goods:The appellant filed an appeal against the order which decided against them regarding the inadmissibility of cenvat credit on capital goods (Dies) not received in the factory but directly sent to job work. The appellant argued that central excise duty was paid on the capital goods, and as per Rule 4(5)(b) of the Cenvat Credit Rules 2002/2004, cenvat credit should be allowed. The issue revolved around whether the credit on such capital goods sent to job workers could be denied. The first appellate authority ruled against the appellant. However, the Tribunal found that the dies were with the job worker since 1980 when the credit of duty paid on capital goods was not admissible as cenvat credit. The Tribunal noted that the problem arose due to the procedural irregularity chosen by the appellant, but since capital goods were used by the job worker for the appellant, they were eligible to send the same. The Tribunal also referred to a judgment regarding duty paid by job workers on repair charges, concluding that the appeal filed by the Department failed on merits and limitation.Limitation Period for Invoking Extended Period:The Commissioner (Appeals) had remanded the case back to the adjudicating authority to give clear findings on all issues raised by the appellant, including the issue of limitation. The Adjudicating Authority confirmed the demand in remand proceedings and imposed a penalty. However, the Commissioner (Appeal) set aside the Adjudicating Authority's order. The Tribunal noted that the stand taken by the Commissioner (Appeals) regarding the extended period not being invoked did not need interference. The Tribunal found that on merits as well as on limitation, the appeal filed by the Department failed, leading to its rejection.The judgment highlighted the importance of following proper procedures in claiming cenvat credit on capital goods and emphasized the eligibility criteria for such credits. It also underscored the significance of adhering to central excise laws and procedures to avoid procedural irregularities. The decision provided clarity on the admissibility of credit on repair charges paid by job workers and the implications of choosing different options in such scenarios. Ultimately, the Tribunal's decision favored the appellant, rejecting the Department's appeal and upholding the appellant's right to cenvat credit on the capital goods sent for job work.