Credit admissibility when inputs are directly sent to job work premises.

PJ/CASE LAW/2015-16/2856

Case:-AMBASSADOR COOLERS PVT. LTD. VERSUS COMMISSIONER OF C. EX., DELHI-II

Citation:- 2015 (320) E.L.T. 332 (Tri. - Del.)

Brief Facts:-The appellant is in appeal against the impugned order to deny Cenvat credit on the premise that the appellant is in receipt of invoices not the goods. Brief facts of the case are that the appellants is a manufacturer of air cooling plant. They placed purchase orders for aluminum sheets/coils which are required to be directly delivered at National Wire Netting Agency, for conversion of the sheets and coils to aluminum mesh/jali. The said goods were purchased by the appellant from M/s. Nowrangroy Rameshwar, Paharganj, Delhi. On the strength of these invoices, the appellant availed Cenvat credit. During the period 2006-2008 an audit was conducted for the manufacture of March, 2008 and it was found that the appellant has placed purchase order to M/s. Nowrangroy Rameshwar to supply aluminium sheets/coils to be delivered directly to M/s. National Wire Netting Agency and taken the Cenvat credit on the invoices issued by M/s. Nowrangroy Rameshwar which is not correct. Therefore, a show cause notice was issued to the appellant dated 14-9-2003 to deny Cenvat credit, consequential demand of duty along with interest and for imposition of penalty. The adjudication took place, demands proposed in the show cause notice were confirmed and penalty equal to the duty was also imposed. The said order was challenged before Commissioner (Appeals) who also confirmed the order of adjudication. Therefore, appellant is before tribunal in appeal.

Appellants Contention:-The learned Counsel appearing on behalf of the appellant submits that the appellant sent the goods directly to the job worker for conversion into wire mesh and same has been received by them after conversion from the job worker. Therefore, they have taken Cenvat credit correctly and goods were sent as per the job work for processing under Rule 4(5)(A) of the Cenvat Credit Rules, 2004. In these circumstances, Cenvat credit cannot be denied. He further submits that the invoices issued by the job worker shows that the job worker has charged VAT on the job work charges on that premise demand has been confirmed on the premise that there is no co-relation or nexus of the goods actually sent to the job worker and received back. In this context, he submits that the invoices issued by the job worker has shown only job work charges and same cannot be price of the goods. He also drew attention to the Invoice No. 922 in book No. 19, dated 21-12-2006 wherein the details of job work charges have been explained. In these circumstances, he submits that demands are not sustainable. He also submits that the impugned order is for 2006-2008 and audit has been conducted in 2008 and show cause notice was issued on 24-7-2009 which is beyond the normal period of limitation and demand is barred by limitation as held by Tribunal in the case of CCE, Kolkata v. Giriraj Industries [2008 (223)E.L.T.640 (Tri.-Kolkata) which has been upheld by Hon’ble High Court as reported in 2009 (242) E.L.T. A84 (Cal.).

Respondents Contention:-On the other hand, learned AR opposed the contention of learned Counsel and submits that in this case, the appellant has failed to co-relate or to show the nexus of the goods sent to the job worker were in sheet and in weight whereas the goods received by the job worker were in unit. It is not coming out whether all the goods sent to the job worker have been received back after processing within 180 days as per Rule 4(5)(A) of the Cenvat Credit Rules, 2004. Further, he has not filed the audit report and relied thereto to go into the details and to verify the contents of the appellants is correct or not. If audit would not have been done, the availment of Cenvat credit could not have been revealed, therefore limitation period is rightlyinvoked.

Reasoning Of Judgement:-Heard the parties. Considered the submissions. On perusal of the record, tribunal find that the appellant has placed the purchase order to supply all the goods to M/s. Nowrangroy Rameshwar, Paharganj, Delhi with the directions that the goods are required to be delivered at National Wire Netting Agency, the job worker. In pursuance of the purchase order, the invoices were raised in the name of appellant and the goods were delivered to M/s. National Wire Netting Agency, which were received by the appellant after processing. On perusal of invoices issued by National Wire Netting Agency, tribunal find that the rates quoted are of job work charges only, although the job worker has paid the VAT thereon. For that, it cannot be concluded that the goods have been sold by the job worker to the appellant. The contention of the appellant that they have sent the goods to the job worker for further processing, if the goods have been processed by the job worker, then the shapes of the inputs received by the job worker would definitely go to a change and the manufactured goods will be a distinct product. Therefore, the contention of the learned AR that nexus is not be proved, is not accepted when the goods have been processed by job worker, there is no verification conducted at the end of job worker to ascertain the facts. When the appellant has filed the reply to show cause notice, the facts were required to be verified which the Revenue has failed to do so. Further more, the contention of the learned AR that the appellant did not intimate to the department that they are sending the goods to the job workers, there is no requirement of Rule 4(5)(A) of the Cenvat Credit Rules, to intimate to the department that they are sending the goods to job worker. Tribunal further find that under Notification 214/86 the job worker is required to intimate the department that they are undertaking the activity of job worker and not required to pay duty but that fact has also been not verified by the department.
In these circumstance, they hold that as the appellant has purchased the goods from the supplier of the goods and sent directly to the job work purpose to the job workers which has been received by them after job work, the appellant is entitled to take Cenvat credit. Consequently the impugned order is set aside. Appeal is allowed with consequential relief, if any.

Decision:- Appeal allowed.

Comment:- The analogy in the case is that if the assessee has purchased the goods from the supplier and sent directly for job work purpose, then also, there is no embargo in availing the cenvat credit. Also there is no requirement under Rule 4(5)(A) of the Cenvat Credit Rules to intimate to the department that the assessee is sending goods to job worker. Moreover, vide Budget, 2015, express provisions have been made as regards credit admissibility when goods are directly sent to the job workers premises for processing.

Prepared By:- Neelam Jain

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PJ/CASE LAW/2015-16/2856

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