2010 (3) TMI 560 - AT - Central Excise

High Court Affirms Tribunal Decision on Cenvat Credit & Modvat for Job Worker

The High Court upheld the Tribunal's decision, affirming the respondent's entitlement to re-credit Cenvat credit without unjust enrichment, following the ... Cenvat/Modvat - Job work - Furnace oil procured on duty payments used in job work of converting billets into wire rods and bars which were supplied to principal manufacturer without payment of duty claiming benefit under Notification No. 214/86-C.E.. The department issued a show-cause notice proposing to reject the refund claim on the ground that the respondent did not substantiate their claim on merits and also did not prove that the incidence of duty had not been passed on to any other person. Held that - the decision of Sterlite Industries (I) Ltd. v. CCE, Pune available. Assessee eligible for credit. Issues:- Dispute over refund claim by respondent for job work undertaken on billets supplied by principal manufacturer.- Applicability of Notification 214/86-C.E. for duty exemption.- Reversal of Cenvat credit on fuel procurement.- Rejection of refund claim by Deputy Commissioner.- Appeal by party leading to Commissioner (Appeals) setting aside Deputy Commissioner's order.- Interpretation of Rule 6(2) of Cenvat Credit Rules.- Revenue's challenge against appellate Commissioner's order.- Claim for re-credit of Cenvat credit reversed earlier.- Application of Rule 57AD(2) of Central Excise Rules and Rule 6(2) of Cenvat Credit Rules to fuels.- Reference to Tribunal's Larger Bench decision in Sterlite Industries case.- Dismissal of department's appeal against Tribunal's Larger Bench decision by High Court.- Entitlement of respondent to re-credit Cenvat credit as per Tribunal's Larger Bench decision.- Absence of plea of unjust enrichment in the appeal.Analysis:1. The dispute arose from a refund claim filed by the respondent for job work done on billets supplied by a principal manufacturer, returning wire rods and bars without duty payment, citing Notification 214/86-C.E. They procured fuel on duty payment, using Cenvat credit, later reversed by the department, leading to the refund claim rejection by the Deputy Commissioner.2. The Commissioner (Appeals) overturned the Deputy Commissioner's decision, citing Rule 6(2) of Cenvat Credit Rules, exempting the manufacturer from paying 8% on exempted final products where fuel was a common input, and rejecting the unjust enrichment principle's application.3. The Revenue challenged the appellate Commissioner's decision, arguing against extending benefits to fuels under Rule 57AD(2) and Rule 6(2) of Cenvat Credit Rules. The respondent sought re-credit of reversed Cenvat credit, relying on the Tribunal's Larger Bench decision in Sterlite Industries case.4. The Larger Bench's ruling, following the Supreme Court's decision in Escorts Ltd. case, allowed job workers to avail Modvat credit for inputs used in job-worked goods, not considered exempted under Rule 57C, as duty was paid by the principal manufacturer.5. The High Court dismissed the department's appeal against the Tribunal's Larger Bench decision, affirming the job worker's entitlement to re-credit Cenvat credit, as per the approved legal position.6. The Tribunal upheld the respondent's right to re-credit Cenvat credit, without the plea of unjust enrichment, as per the Tribunal's Larger Bench decision, ultimately dismissing the Revenue's appeal.