Whether credit deniable to job worker on the ground that clearance was without payment of duty?

PJ/CASE LAW/2015-16/2892

Case:-AURANGABAD AUTO ENGG. PVT. LTD. VERSUS COMMR. OF C. EX., AURANGABAD

Citation:- 2015 (40) S.T.R. 776 (Tri. - Mumbai)

Brief Facts:-The appellants are in appeal against the order of denial of input service credit on the ground that such credit was taken on input services which were used for manufacturing of exempted as well as dutiable goods during the period of dispute. The facts of the case are that the appellants are manufacturer of vehicle parts. During the impugned period, they manufactured some of these parts on job work basis. Some motor vehicle parts they manufactured independently also. The motor parts manufactured on job work basis were cleared without payment of duty and the motor parts independently manufactured by them were cleared on payment of duty.

Appellants Contention:-The learned Advocate for the appellants submits that these job worked goods were supplied to the principal manufacturer, who further used this goods in manufacturing of final product, which was cleared on payment of duty, which is not in dispute. Therefore the matter is squarely covered by the decision of Larger Bench of this Tribunal in the case of Sterlite Industries (I) Ltd. v. Commissioner of Central Excise, Pune reported in 2005 (183) E.L.T. 353 (Tri.-LB) therefore the issue is no more res integra, the appeal is allowed by setting aside the impugned order.

Respondents Contention:-Department was of the view that input services which were used in relation to manufacture of goods on job work basis, the input service credit was not admissible to the extent the services used in relation to manufacture of the job worked goods. Therefore, the credit to that extent was denied. Therefore, the show cause notice was issued for demand of inadmissible input service credit along with interest and imposing the penalty under Section 11AC of the Central Excise Act, 1944. The demands in show cause notice were resulted into adjudication order. On appeal before the first appellate authority, the adjudication order was upheld. Against that order, the appellants are in appeal before this Tribunal.

Reasoning of Judgement:-On careful examination of the facts and submission made by the learned Advocate, tribunal find that in this case it is not disputed that the goods manufactured by the appellants on job work basis have been cleared without payment of duty to their principal manufacturer, who further used these goods in manufacturing of final product which were cleared on payment of duty. Therefore the decision of Larger Bench of this Tribunal in the case of Sterlite Industries (I) Ltd. (supra) is squarely applicable to the facts of this case. In view of the decision of the Larger Bench of this Tribunal (supra), the appellants are entitled to take the Cenvat credit as availed by them. Therefore, they set aside the impugned order and allow the appeal.

Decision:-Appeal allowed.

Comment:- The gist of the case is that the goods manufactured on job work basis are although cleared without payment of duty to the principal manufacturer but are further used in manufacturing of final product which are cleared on payment of duty and so the cenvat credit cannot be denied to the job worker. This is based on the landmark decision given in the case of Sterlite Industries (I) Ltd.

Prepared By:- Neelam Jain

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PJ/CASE LAW/2015-16/2892

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