2016 (12) TMI 1268 - AT - Central Excise

Job worker entitled to cenvat credit on furnace oil for TMT bars manufacturing

M/s SRMB Srijan Ltd. Versus Commr. of Central Excise, Bolpur

The Tribunal ruled in favor of the appellant, a job worker, allowing cenvat credit on furnace oil used in manufacturing TMT bars. The Department's denial ... CENVAT credit - job-work - denial on the ground that the appellant has not discharged any duty on TMT bars - Held that: - the Larger Bench of the Tribunal in the case of Sterlite Industries (I) Ltd. [2004 (12) TMI 108 - CESTAT, MUMBAI], held that job-worker received goods from the principal under Rule 57E of the erstwhile Central Excise Rules, 1944, entitled to take credit of duty in respect of other inputs used by him in the manufacture of job-worked goods without payment of duty for further utilization in the manufacture of the final products by the principal, which are cleared on payment of duty by the principal manufacturer - credit allowed - appeal allowed - decided in favor of appellant-assessee. Issues:1. Denial of cenvat credit on furnace oil by the Department.2. Invocation of extended period for denial of credit.3. Interpretation of job work Notification No.214/86.4. Application of Rule 3 and Rule 6 of CER, 2002.5. Consideration of precedents regarding job workers' entitlement to credit.Analysis:1. The appellant, a job worker, availed cenvat credit on furnace oil used in the manufacture of TMT bars. The Department denied the credit, arguing that since no Excise duty was paid on the bars, the credit was not permissible. The appellant cited the decision in Sterlite Industries (I) Ltd. Vs. CCEx., Pune, where job workers were allowed credit for materials used in job work. The appellant contended that the denial of credit was unjustified, as all relevant details were disclosed to the Department.2. The Department invoked an extended period for denial of credit from 2005-2006 to 2006-2007, amounting to Rs. 14,97,173, with an equal penalty under Section 11AC of the Central Excise Act, 1944. However, the appellant argued that there was no suppression of facts, as all movements and processes were duly reported to the Department.3. The Tribunal analyzed the job work Notification No.214/86 and the Larger Bench's decision in Sterlite Industries (I) Ltd. The Tribunal held that job workers were entitled to credit for duty paid on inputs used in job work, even if the duty was discharged by the principal manufacturer. The Tribunal noted that previous decisions under the Cenvat Credit Rules, 2004, supported the allowance of credit to job workers.4. The Tribunal referred to cases like Prerna Fine Chem Pvt. Ltd. and MPI Paper Pvt. Ltd., where similar issues were decided in favor of the appellants based on the precedent set by the Larger Bench's decision. The Tribunal emphasized that the denial of credit was not justified, as job workers were entitled to cenvat credit for materials used in job work, following the principles established in previous rulings.5. Considering the arguments and precedents, the Tribunal concluded that the denial of credit on furnace oil to the appellant was unwarranted. The impugned orders were set aside, and the appeal was allowed in favor of the appellant, emphasizing the entitlement of job workers to cenvat credit for materials used in job work.