Whether credit deniable to job worker on ground that goods were cleared without payment of duty?

PJ/CASE LAW/2014-15/2525

Case:- WESTERN INDIA FORGING P. LTD. VERSUS COMMISSIONER OF C. EXCISE, PUNE

Citation:-2014 (36) S.T.R. 637 (Tri. - Mumbai)

Brief facts:- The appellant is in appeal against the impugned order for denying the input service credit availed by them for Goods Transport Agency service and Business Auxiliary Service availed by them as manufacturer of excisable goods on job work basis.
The brief facts of the case are that the appellants are the job worker and during the course of their activity of job work, they availed the services of Goods Transport Agency and Business Auxiliary Service. They took credit of these services and did not pay Central Excise duty on the job work goods cleared by them to the principal manufacturer who suffered duty on the final product. They neither paid the Service Tax nor paid the duty.
Revenue is of the view that as the appellant is a job worker therefore, they are not required to pay duty or Service Tax. Therefore, they are not entitled to take Cenvat credit on the Goods Transport Agency and Business Auxiliary Service. Accordingly, impugned proceedings were initiated and the demand of reversal of credit along with interest and penalty were confirmed against the appellant. Against the said order, appellant is before the Tribunal.

Appellant’s contention:- Ld. counsel appeared on behalf of the appellant submits that as per Notification 214/86-C.E., dated 25-3-1986, the job worker can receive the goods from the principal manufacturer without payment of duty and after processing the goods, the job worker can clear the goods without payment of duty and further as per Notification 8/2005, dated 1-3-2005 again the job worker was allowed to avail services and not to pay Service Tax on their exempted services of job work. In these circumstances, whatever credit have taken by the appellant is entitled to take credit, as final product which were supplied by them to the principal manufacturer has suffered duty as per the decision in Sterlite Industries (I) Ltd. - 2005 (183)E.L.T.353 (T-LB).

Respondent’s contention:- On the other hand, ld. AR opposed the contention of the counsel and submits that as the appellant is providing exempted service as job worker, therefore they are not entitled to avail credit of the input services.

Reasoning of judgment:- In this case the appellant is a job worker and the final product which they supplied to the principal manufacturer has suffered duty. Therefore, the issue is to be examined in the scenario whether the final product has suffered duty or not. As per Notification 214/86 the job worker can receive the goods from the principal manufacturer without payment of duty and also procure the inputs on payment of duty and can avail the credit. He is also entitled to clear the goods without payment of duty to the principal manufacturer who cleared the final goods on payment of duty. The same treatment has been given by the Notification 8/2005 (ibid). In these circumstances, as it is an admitted fact that the final products which have been processed by the appellant have suffered duty, therefore, appellants are entitled to take the credit of the input service.
With these observations, Hon’ble Tribunal set aside the impugned order and allowed the appeal with consequential relief.
Decision:- Appeal allowed.

Comment:- The crux of this case is that the job worker is entitled to avail the cenvat credit of various inputs and input services used by them and the same cannot be denied on the ground that the goods cleared by them were without payment of duty. This is for the reason that the principal manufacturer uses the job-worked goods in manufacturing final products that are ultimately cleared on payment of duty. This reasoning was also confirmed by the Bombay High Court in the case of Sterlite Industries.

Prepared by:- Monika Tak

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PJ/CASE LAW/2014-15/2525

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