whether credit of capital goods can be taken which were exclusively used for job work?

PJ/CASE LAW/2016-17/3178

Case:-COMMISSIONER OF CENTRAL EXCISE, AURANGABAD Vs AMPLICOMP (I) LTD

Citation:-2015-TIOL-2556-CESTAT-MUM

Brief facts:- material facts of the case are that the respondent assessee imported certain capital goods under EPCG scheme for their Bangalore plant. Due to some practical difficulty, after taking permission from DGFT, they cleared the capital goods and brought to their Aurangabad unit. They availed the cenvat credit of the CVD paid on such capital goods. The said capital goods were initially used in the manufacture of stators and motors which were being manufactured by the respondent on job work basis for some other customers and no duty was being paid by them as the duty was being paid by their customer on their final product. Later on, they reversed the entire cenvat credit taken on the capital goods and shifted the capital goods to their Bangalore plant.

Appellant’s contention:-Learned AR submitted that the demand had been issued on two counts. The first count was that the respondent had failed to produce a triplicate copy of the bill of entry and in the absence of the said documents; they were not entitled to take cenvat credit. The second ground on which the demand was raised was that the respondent did not pay any duty on the goods produced from the said capital goods as they were doing only the job work and as per the condition prevalent at that time that if the capital goods were used exclusively in the manufacture of exempted goods, credit on the capital goods cannot be availed. The learned AR took them through the show cause notice and submitted that in view of this factual position, the respondent was not entitled to take the cenvat credit.
Respondent’s contention:-Learned counsel for the respondent submitted that they had the triplicate copy of the bill of entry, but somehow it was later on misplaced and they had produced the attested copy of the bill of entry from the Custom House. They had also registered a FIR for the loss or the misplacement of the triplicate copy of the bill of entry. He further submitted that it was not as if the bill of entry was not available at the time of taking the credit. Even the range Superintendent had come and visited after installation of the machine and issued the installation certificate after seeing the bill of entry etc. and in view of this position, the demand was not sustainable. In any case, extended period of limitation cannot be invoked in such circumstances. As far as the second issue is concerned, the learned counsel submitted that it was not as if the stators and motors being produced from the said goods were not dutiable but since they were doing job work, no duty was paid by them and this fact had been very clearly mentioned in the RT12 returns filed by them. It was also submitted that in any case, these machines were later on shifted to the Bangalore unit after reversing the credit availed by them and under these circumstances, no duty can be demanded from them. Moreover, extended period of limitation cannot be invoked.

Reasoning of judgment:-they had considered the submissions made by both the sides. it was noted that the Commissioner in his order had given the following findings:
"7. So far as the admissibility of credit is concerned the Rule 57G(3) has clearly laiddown that the credit of duty is admissible on the basis of triplicate copy of Bill of Entry. However, I find that there is no evidence to show that assessee was not having triplicate copy of Bill of Entry when they have taken the credit. The documents were verified by Range officer & installation certificate has been issued and assessments for the relevant period have also been finalised, therefore, allegations to invoke extended period are not sustainable. Thus without going in to the details on merits as to whether credit is admissible when assessee is not having triplicate copy of Bill of Entry and have attested copy of the same, the extended period at this juncture can not be invoked as there is no case of suppression or misstatement of facts and demand is not sustainable on this ground.
8. The next issue is about availment of Modvat credit on capital goods, which were exclusively used for manufacture of goods on job work basis on which no duty is required to be paid. I find that Rule 57R of the C.Ex. Rules 1944 specified that no credit of specified duty shall be allowed on capital goods which are exclusively used in the manufacture of final product which are exempted or chargeable to Nil rate of duty.
In this case the assessee vide their letter AIL/CEX/9899/ 001 dtd. 25.02.1999 have filed declaration under Rule 57 T of the C.Ex. Rules, 1944 wherein they have declared that the capital goods shall not be exclusively used for production of final product which is exempt from the payment of duty or is chargeable to Nil rate of duty. However assessee has not cleared any goods on payment of duty from their unit. They only manufactured goods on job work for others and cleared them without payment of duty. Thus, the capital goods have not been utilized for manufacture of dutiable goods. So Modvat credit is not admissible. However, I find that the assessee has been submitting monthly RT12 return with a forwarding letter wherein it was clearly mentioned that they have not started their production and only doing job work for other manufacturers. Thus it appears that there was no manifestation of their intention to evade duty in violation of Central Excise Rules & in conjunction with their 57-T declaration. Therefore extended period under proviso to Section 11A(1) is not applicable in this case and the demand is not sustainable."
It was held that the main grounds of the appeal were that the Commissioner, Aurangabad was Incorrect in holding that extended period under the proviso to Section 11A(1) was not applicable in this case.
They had considered the grounds of appeal. They found that on merits itself, the demands were not sustainable. It was not under dispute that the goods were imported and CVD was paid. The respondent assessee had produced the triplicate copy of the bill of entry at the time of taking the credit. It was only after the audit was done that the said copy was not available. They also notes that installation certificate was issued by the Superintendent after visiting the factory and seeing the bill of entry etc. Under the circumstances, the view taken by the Commissioner was correct.
Similarly, they found that no case had been made by the Revenue that the respondent has used the machine exclusively for the manufacture of exempted goods. The respondent was manufacturing the goods on job work basis, which were not exempt but were dutiable and duty was paid by their customer. In any case, they found that the said machines were removed from their Aurangabad plant on reversal of the entire amount of the cenvat credit taken on the capital goods and in view of the fact that the entire amount of cenvat credit was reversed only later on, nothing survives in the matter. The appeal filed by the Revenue was dismissed.

Decision:-appeal dismissed

Comment:-the gist of the case is that the credit on capital goods can be utilized even if they are used exclusively for job work on which no duty has been paid by the assessee as the said goods are not exempt from the duty. It was held that the goods were not exempted it was only that the Duty was to be paid by the principal manufacturer and not the job worker. Hence the credit was rightly taken by the assessee.

Prepared by: - Prayushi Jain

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PJ/CASE LAW/2016-17/3178

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