Job-work CENVAT reversal demands were unsustainable where no recovery mechanism existed and suppression was not proved.

During the relevant period, CENVAT credit reversal for inputs and capital goods sent to job work could not be enforced through recovery where no specific mechanism had yet been introduced, so demands for non-receipt within 180 days were not sustainable. The same treatment applied to captively manufactured moulds, dies and tools sent for job work, as the job-work exemption framework covered such movement and any duty incidence would in any event be creditable. On limitation, the extended period could not be invoked without proof of suppression of facts with intent to evade duty, so the demand was time-barred.

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Issues: (i) Whether CENVAT credit attributable to inputs and capital goods sent for job work could be recovered for non-receipt within 180 days during the relevant period when no specific recovery mechanism had yet been introduced; (ii) Whether the demand of duty on captively manufactured moulds, dies and tools sent for job work and not received back within 180 days was sustainable; (iii) Whether the demand was barred by limitation.

Issue (i): Whether CENVAT credit attributable to inputs and capital goods sent for job work could be recovered for non-receipt within 180 days during the relevant period when no specific recovery mechanism had yet been introduced.

Analysis: The dispute related to the period 2002-03. During that period, the relevant job-work provision required reversal of credit if the goods were not received back within 180 days, but a specific recovery machinery for such reversal was inserted only later by amendment. The Tribunal relied on the settled position that, prior to the later amendment, recovery of such credit could not be enforced under the unamended rule.

Conclusion: The demand of CENVAT credit on inputs sent for job work and not received back within 180 days was not sustainable.

Issue (ii): Whether the demand of duty on captively manufactured moulds, dies and tools sent for job work and not received back within 180 days was sustainable.

Analysis: The moulds, dies and tools were covered by the job-work exemption framework governing manufacture through job workers. The Tribunal noted that the exemption scheme permitted such movement for job work and that, even otherwise, any duty paid on such capital goods would be available as credit. On that basis, the demand raised on this count could not survive.

Conclusion: The demand of duty on moulds, dies and tools was not sustainable.

Issue (iii): Whether the demand was barred by limitation.

Analysis: The show-cause notice was issued for a past period by invoking the extended period. The Tribunal found no material showing suppression of facts with intent to evade duty. In the absence of such proof, invocation of the extended period was not justified.

Conclusion: The demand was time-barred.

Final Conclusion: The appeal succeeded on merits and on limitation, and the impugned order was set aside with consequential relief.

Ratio Decidendi: Where, during the relevant period, no effective recovery mechanism existed for reversal of CENVAT credit on job-work goods not returned within the stipulated time, such demand cannot be sustained, and the extended period of limitation cannot be invoked without proof of suppression with intent to evade duty.

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