CENVAT credit on job-worked capital goods was reversible for non-return within the prescribed period, but penalty was deleted.

CENVAT credit on capital goods sent to a sister unit for job work was reversible because the record did not show receipt back within 180 days, and re-credit was available only upon subsequent receipt; the demand for reversal was upheld. Penalty under Rule 15(2) read with Section 11AC was not sustained in view of the High Court ruling relied on by the assessee, so the penalty was deleted.

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Issues: (i) Whether CENVAT credit availed on capital goods sent to a sister unit for job work and not received back within 180 days was liable to be reversed and the demand sustained. (ii) Whether penalty was imposable in the facts of the case.

Issue (i): Whether CENVAT credit availed on capital goods sent to a sister unit for job work and not received back within 180 days was liable to be reversed and the demand sustained.

Analysis: Rule 4(5)(a) of the CENVAT Credit Rules, 2004 required capital goods sent out for job work to be received back within the stipulated period. The record did not show that the capital goods were received back within 180 days or thereafter. In the absence of such proof, the assessee was bound to reverse the credit, with re-credit available only when the goods were subsequently received back.

Conclusion: The demand for reversal of CENVAT credit was upheld against the assessee.

Issue (ii): Whether penalty was imposable in the facts of the case.

Analysis: Penalty under Rule 15(2) of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 was not warranted in view of the binding High Court ruling relied upon by the assessee on the penalty aspect.

Conclusion: The penalty was set aside in favour of the assessee.

Final Conclusion: The appeal succeeded only to the limited extent of deletion of penalty, while the credit demand was sustained.

Ratio Decidendi: Where capital goods cleared for job work are not shown to have been received back within the prescribed period, CENVAT credit is reversible, but penalty cannot be sustained absent the requisite basis under the governing provision and precedent.

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