Whether total cenvat credit on own input used in the manufacturing of goods is allowable to the job worker?

PJ/Case Laws/2011-12/1126

Prepared By:
CA. Rajani Thanvi &
Kavita Thanvi

Case: SUDHIR FORGING v/sCOMMISSIONER OF CENTRAL EXCISE, LUDHIANA

Citation: 2010 (251) E.L.T. 478 (Tri. - Del.)

Issue:- Whether total cenvat credit on own input used in the manufacturing of goods is allowable to the job worker?

Brief Facts:- The appellant was a manufacturer as well as a principal manufacturer on job work basis.He received the inputs (alloy steel rounds) from the principal manufacturer, but in manufacturing they used their own furnace oil, RFO and LDO. And for which they took Cenvat credit. They manufacture rough steel on job work and cleared to the principle manufacturer without payment of duty under Notification No. 214/86-C.E. and the principal manufacturer thereafter cleared the finished goods on payment of duty. The assistant Commissioner confirm the demand with interest and penalty. Against which the appellant is in appeal before the tribunal.

Appellant’s Contentions:- The appellant contended that the same issue has been decided by the Larger Bench of the Tribunal in the case of Sterlite Industries (I) Ltd. v. CCE, Pune reported in 2005 (183) E.L.T. 353 (Tri.-LB) wherein it was held that job worker, who received goods from the manufacturer under Rule 57E of Central Excise Rules, 1944, is entitled to take credit of duty in respect of other inputs received directly and used by him in the manufacture of said goods on job work basis.

Respondent’s contentions: The respondent argued thatin this case where the appellant cannot be said to be a job worker as they also manufactured goods of, their own, while a job worker is that person who manufactures purely on job work basis. Hence in such situation, the provisions of Rule 6(2), become applicable and in respect of rough steel forgings cleared at nil rate of duty, the appellant should have reversed the proportionate and that all the judgments cited by the appellant are for the period prior to issue of Notification No. 27/05-C.E. dated 6-5-05 by which the exclusion of fuel inputs from the operation of Rule 6(2) had been removed and that if cenvated fuel inputs are used for dutiable as well as exempted goods, either separate accounts are required to be maintained, and if such separate accounts are not maintained, proportionate credit in respect of exempted goods is to be reversed. He also pleaded that the fact that out of total disputed amount of Rs. 2,47,508/-, the appellant have paid an amount of Rs. 54,568/- which shows that the appellant themselves have accepted that they are not eligible for this credit. He also pleaded that since the appellant have taken wrongly Cenvat credit and have not reversed, penalty should be imposed.

Reasoning of Judgment:-The Tribunal relied on the Larger Bench judgment of the Tribunal in the case of Sterlite Industries (I) Ltd. v. CCE, Pune (supra). They found the correctness of the Larger Bench’s judgment in the case of Sterlite Inds. (I) Ltd. has been confirmed by the Hon’ble Mumbai High Court in respect of Appeal No. 76/08 [2009 (244) E.L.T. A89 (Bom.)] filed by the Revenue. Just because the appellant in addition to manufacture of rough forgings on job work basis, also manufactured the rough forging for themselves, they do not cease to the job worker and therefore, the case of Sterlite Inds.(I) Ltd. (supra) was squarely applicable to this case.

Decision: - The appeal was allowed.

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PJ/Case Laws/2011-12/1126

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