2015 (12) TMI 1097 - AT - Central Excise

Tribunal grants EOU capital goods credit for job work basis, clarifies CENVAT rules

M/s. S.K.S. Mills Ltd. Versus CCE, Salem

The Tribunal ruled in favor of the appellant, an EOU, allowing their claim for capital goods credit for goods used in job work basis. The appellant's ... CENVAT Credit - Use of capital goods for Job Work - duty of excise paid on debonding of 100% EOU on capital goods claimed as credit - Held that:- So far as material facts placed by learned counsel is concerned, that remained undisputed by Revenue. Further added fact that came to record is that the principal manufacturer who assigned the job work to the appellant was an EOU. Part of the goods manufactured by the appellant were processed and exported by that EOU. The rest of the goods were domestically cleared making payment of duty. Honble High Court of Madras in the case cited (2015 (9) TMI 119 - MADRAS HIGH COURT) has held that clearance of the goods by a job worker if exempt from duty that does not disentitle the job worker to the CENVAT credit. Appellant says that it had not made clearance under Notification No. 30/2004 dated 9.7.2004 but made clearances to an EOU - capital goods of the appellant were used to manufacture dutiable intermediary for the EOU which suffered duty partly on the value addition thereto by the principal manufacturer when cleared in DTA. Therefore, denial of capital goods credit to the appellant is unwarranted - Decided in favour of assessee. Issues:1. Entitlement to capital goods credit for goods used in job work basis.2. Interpretation of Notification No. 30/2004 regarding exemption of goods.3. Application of CENVAT credit rules for job workers.Analysis:1. The appellant, an EOU, acquired capital goods domestically without paying duty. Upon de-bonding, appropriate duty was paid, and the excise duty paid was claimed as capital goods credit. The goods were used for job work to manufacture intermediary products. The department alleged denial of credit due to manufacturing exempted goods, but the appellant contended that job work clearances do not constitute exempted goods, citing a Madras High Court decision. The Tribunal agreed with the appellant, stating that denial of capital goods credit was against the law.2. The Revenue argued that since the appellant did not pay duty for goods cleared under Notification No. 30/2004, they were not entitled to capital goods credit. They relied on a decision regarding exempted goods. However, the Tribunal found that the appellant's job work clearances were not covered under the said notification. The Tribunal noted that the principal manufacturer, an EOU, exported part of the goods and cleared the rest domestically, paying duty. Following the Madras High Court's decision, the Tribunal held that the appellant was entitled to CENVAT credit.3. Upon hearing both sides and examining the records, the Tribunal found that the material facts presented by the appellant were undisputed by Revenue. The appellant's capital goods were used to manufacture dutiable intermediary products for the EOU, which paid duty on the value addition when clearing the goods domestically. Therefore, the denial of capital goods credit to the appellant was deemed unwarranted, and all three appeals were allowed.This judgment clarifies the entitlement to capital goods credit for job work clearances, the interpretation of exemption notifications, and the application of CENVAT credit rules for job workers, providing a detailed analysis of the facts and legal precedents involved in the case.