Whether credit taken by the principal manufacturer on discontinuation of job work is irregular ?

PJ/CASE LAW/2015-16/3026

Case: PARLE PRODUCTS PVT. LTD.Vs COMMR. OF C. EX. & CUS., BANGALORE-II

Citation: 2015 (317) E.L.T. 174 (Tri. - Bang.)

Brief Facts :In this case appellant had a job-worker by name M/s. BBL Foods Pvt. Ltd. (BBL). BBL acted as a job-worker and the contract was discontinued. After the discontinuation of the contract, the BBL foods was to send back the chocolate chips which were in stock and also some machines and other inputs. The same were returned under the invoices during the period from 25-8-2003 to 30-8-2003 on payment of duty. However on 6-9-2003, the appellant issued a letter to BBL asking them to raise a supplementary invoice in respect of chocolate chips for a differential value of Rs. 47,64,193.75 and they were also asked to pay duty while raising the supplementary invoice for differential amount. The job-worker calculated and paid the duty payable by utilizing the CENVAT credit in the account. In the letter job- worker was also to put a remark as under :
‘Value escalation on account of expenses towards dip-friz storage/handling & transport incurred & other misc. costs. They were also asked to indicate original invoice No. 198, 210, 213, 214 & 215, dated 28, 29 & 30 August 2003’.
Appellant also instructed the job-worker to raise another invoice in respect of PPPL, Bangalore (another unit of the appellant) in respect of two machines. These machines are Pillow Pack Machine and job-worker was instructed to raise invoice for Rs. 8,73,600/-. BBL was also instructed to debit Rs. 34,427/- in PLA for chocolate chips and also the balance amounts may be paid from CENVAT credit account.
Taking a view that with an intention to utilize the unutilized CENVAT credit lying with the job-worker, the appellant had initiated the process and completed the operation, proceedings were initiated which culminated in confirmation of demand for CENVAT credit of Rs. 9,70,012/- availed by the appellant on the basis of the invoices issued as per the letter referred to above. Further interest also has been demanded and penalty also has been imposed.
In this case what is happened is job-worker has paid the duty no doubt by utilizing the CENVAT credit and the appellant has availed the CENVAT credit. The decision of the Hon’ble Supreme Court in the case of MDS Switchgear Ltd. reported in [2008 (229)E.L.T.485 (S.C.)] covers the issue and on this basis itself the appellant's case can be disposed of in their favour. The only problem arises here is that the excise duty was paid by utilizing the CENVAT credit and it was as per the direction of the appellant only. This point was vehemently argued by the AR and he read out several paragraphs in the order-in-original to submit that this was a planned operation to utilize the CENVAT credit lying with the job-worker. This is quite possible. However in the absence of any evidence to show that the appellant had not paid the amount of Rs. 47,64,194/- and Rs. 8,73,600/-, for taking back the CENVAT credit of 16% it would be difficult to assume that a party would pay 100% towards value. Unless it is shown that this amount was not paid or this was a paper transaction, it is difficult to take a view that this was a planned operation to extract the CENVAT credit. The amount has been paid in reality by the appellant and in the absence of contrary evidence on record that would be obvious conclusion. There was a possibility of the Revenue taking a view that the job worker having realized the excess value should have debited the CENVAT credit and paid the amount in cash and commencement of proceedings against the job-worker if the appellant had not ensured that the job worker had paid the differential duty arising because of the transaction. That being the situation, one cannot really come to the conclusion that this was a planned operation to extract Cenvat credit. The department could have had a better case if there was any evidence to show that there was no payment by the appellant to the job-worker but it was paper transaction and only credit was transferred.
In view of the above position, the decision of the Hon’ble Supreme Court is squarely applicable to the facts of this case and therefore appeal has to be allowed with consequential relief if any to the appellant.

Decision : Appeal Allowed

Comment : The caseis relatedto irregular availment of cenvat credit. Job work was discontinued and Job worker has dischargedtheirduty liability on goods removed from job worker to pricipal manufacturer. The credit availed by principal manufacturer was denied by the department on the ground that the availment of Cenvat credit was irregular because itwas planned by the appellant to utilize Cenvat credit lying with job worker.
Tribunal held that, in absence of any evidence that appellant did not pay invoice amount for taking Cenvat credit it would be difficult to assume that party would pay 100% towards value. Hence assessee’a appeal allowed.

Comments

PJ/CASE LAW/2015-16/3026

Post a Comment

Query