Whether credit of duty wrongly paid by job worker available to principal manufacturer?

PJ/CASE LAW/2015-16/2905

Case:-M/S COMMISSIONER OF CENTRAL EXCISE, CHENNAI VS SUNDARAM AUTO COMPONENTS LTD,

Citation:-2015-325- E.L.T. 104 (MAD.)

Brief facts:-The appellants is in appeal against the impugned order in appeal which confirmed the demand of duty of Rs. 1,91,995/- being Cenvat credit availed under Rule 14 of Cenvat Credit Rules read with Section 11A of the Central Excise Act,1944.

The first respondent/assessee handed over plastic materials during the period from July, 2006 to December, 2006 to a Company by name Nypro Forbes Products Private Limited for carrying out certain job works. The goods were handed over after availing credit for inputs, but, not actually paying duty. The Company which undertook the job work, while returning the goods, after carrying out the job work, raised invoices, for amounts including the duty that they paid. Even according to the Department, the job worker was not liable to make payment of duty. But, since the duty was paid by the job worker and also claimed from the first respondent/assessee, the first respondent/assessee claimed credit.

Appellant’s contention:-The Revenue department was concerned about the fact that whether the manufacturer is entitled to claim credit for duty paid by job worker or not and this is the sole reason that revenue department had come up with the above appeal regarding credit availment of duty paid by job worker.

Respondent’s contention:- The Department went on a wrong presumption that credit had been claimed twice by the first respondent but as a matter of fact, the assessee did not claim credit twice over. At the time when the goods were supplied, they availed the credit. After the Company which undertook the job work, had paid the duty and collected it from the assessee, what the first respondent collected was only the duty that had to be paid on account of the mistake committed by the job worker.

The following Case laws were relied upon by them:-

a.    Commissioner Vs. Kohinoor Printers Pvt. Ltd. – 2015 (321) E.L.T. 448(Mad)
b.    Commissioner Vs Narmada Chematur Pharmaceuticals Ltd. – 2015 (179) E.L.T. 276 (S.C)
c.     International Auto Ltd VS Commissioner – 2005 (183) E.L.T. 239 (S.C).

Reasoning of judgment:-The Hon’ble Tribunal have carefully considered the rival contentions.

The above issue has already been answered by Supreme Court in International Auto Ltd VS Commissioner [2005 (183) E.L.T. 239 (SC)]. It was held that credit of duty paid by job worker even when he is not required to pay it, can be availed by the manufacturer.

The original authority and the appellate authority wrongly construed the same as a double benefit by applying the theory of unjust enrichment. This is what was rectified by the Tribunal. Hence, the order of the Tribunal is in accordance with law. Therefore, the question of law is answered in favour of the assessee. The appeal is dismissed.

Decision:-Appeal Dismissed

Comment:-The substance of the case is that in view of the Supreme Court decision in the case of International Auto Ltd. Vs Commissioner [2005 (183) E.L.T. 239(S.C.)] the credit of duty paid by the job worker even if not required to be paid was held to be admissible. Here, only basis for denying credit has been that Department went on a wrong presumption about assessees taking double benefit of Cenvat credit, i.e., credit of inputs used in job work and the duty paid by the job worker. It was held that as the assessee is not taking double benefit, the cenvat credit was admissible to them.

Prepared by:- Manish Satyani

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PJ/CASE LAW/2015-16/2905

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