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PJ/Case law/2013-14/1629

Whether credit admissible on the invoices endorsed by the job worker?

Case:-M/s SANGHI THREADS PVT LTD Vs COMMISSIONER OF CENTRAL EXCISE, HYDERABAD
 
Citation:-2013-TIOL-620-CESTAT-BANG
 
Brief Facts:- This application filed by the appellant seeks waiver of pre-deposit and stay of recovery in respect of CENVAT credit of Rs.67,589/- denied to them for the period from October to December 2006. The denial of the credit is on the ground that the relevant invoices were not issued to the appellant by the manufacturer of inputs. The invoices were issued to the appellant's job worker and the latter made endorsements thereon. The endorsed invoices were used by the appellant to take the CENVAT credit in question.
 
Appellant Contention:- The learned counsel for the appellant seeks to justify this action on the strength of certain provisions of Rule 3(1) of the CENVAT Credit Rules 2004. The provision cited by the learned counsel only shows that the inputs covered by the manufacturer's invoices could be used by a job worker for manufacture of intermediate products for the principal manufacturer of the final products. This provision does not advert to the manner of issue of the relevant invoices.
 
The learned counsel also submits that the demand is heavily time-barred inasmuch as it was raised in a show-cause notice issued in August 2009 for the period October to December 2006. The show-cause notice alleged suppression of facts. The learned counsel submits that they did not suppress any material fact inasmuch as, as early as in October 2006, they had written to the Assistant Commissioner of Central Excise that they proposed to get their final products manufactured by job-workers and that the procedure laid down for job work under Notification No. 214/86 was proposed to be followed.
 
Respondent Contention:- Per contra, the learned Deputy Commissioner (AR) refers to Rule 9 of the CCR, 2004 and submits that endorsed invoice is not one of the prescribed documents for the purpose of availment of CENVAT credit.
 
Reasoning of judgment:- Tribunal have also perused the relevant provisions and have found no mention of endorsed invoice in the list of documents prescribed under the Rule. Tribunal stated that it is not oblivious of the need to interpret the provisions harmoniously. But any provision so interpreted should be squarely applicable to the given factual situation so as to enable the appellant to claim CENVAT credit. If the manufacturer of inputs had issued the invoices to the appellant (principal manufacturer of final product) while sending the goods to the latter's job -worker, it would have been consistent with the established trade practice. In the instant case, the manufacturer of inputs sent the goods along with invoices to the appellant's job worker and the latter made endorsements on the documents. The invoices so endorsed do not figure in the list of documents prescribed under Rule 9. Therefore, the appellant has failed to make out a case on merits. As far as the limitation contention is concerned, the appellant have intimated that they proposed to get their final products manufactured by job-workers and that the procedure laid down for job work under Notification no. 214/86 was proposed to be followed vide a letter. This letter (copy available on record) did not propose that the appellant would take CENVAT credit on invoices endorsed by their job-worker. In other words, the letter does not amount to intimation of the material fact.  
 
In view of the above discussion and findings,the appellant is directed to pre-deposit the entire amount of CENVAT credit within six weeks and report compliance to the Deputy Registrar on 1/4/2013. The Deputy Registrar is to report to the Bench on 5/4/2013. Subject to due compliance, there will be waiver and stay in respect of the penalty imposed on the appellant.
 
Decision:-Pre-deposit ordered.
 
Comment:- It can be concluded from this case is that proper procedure is required to be followed with respect to inputs used in the manufacture of intermediate product by a job worker so as to avail credit on the same. Tribunal has taken a prima facie view that endorsement of invoices by job worker would not be eligible for credit as the invoices are to be in the name of principal manufacturer and such endorsed invoices are not prescribed documents for availing credit. 

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