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TMI ID= 335069
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2016 (11) TMI 1087 - CESTAT MUMBAI

Commissioner of Central Excise, Pune -III Versus Bharat Forge Ltd. (Vice-versa)

Recovery of Cenvat Credit - Captive consumption - manufacture of dies - job work - whether recovery of Cenvat Credit availed on the inputs used for the manufacture of dies and for the purpose of job work on the ground that the job work activities were exempted under N/N.214/86-CE dated 25/03/86, justified? - Held that: - reliance placed on the decision of the case Sterlite Industries (I) Ltd., [2004 (12) TMI 108 - CESTAT, MUMBAI] where it was held that Modvat credit of duty paid on the inputs used in the manufacture of final product cleared without payment of duty for further utilisation in the manufacture of final product, which are cleared on payment of duty by the principal manufacturer, would not be hit by provision of Rule 57C.

Recovery of CENVAT credit not sustained - appeal allowed - decided against Revenue.

No.- E/1308, 1322/09 & E/1684, 1757 & 1758/11

Order No.- A/87259-87263/16/SMB

Dated.- April 25, 2016

Citations:

  1. ESCORTS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, DELHI - 2004 (8) TMI 106 - SUPREME COURT OF INDIA

  2. Commissioner Versus Sterlite Industries (I) Ltd. - 2008 (8) TMI 783 - BOMBAY HIGH COURT

  3. STERLITE INDUSTRIES (I) LTD. Versus COMMISSIONER OF CENTRAL EXCISE, PUNE - 2004 (12) TMI 108 - CESTAT, MUMBAI

  4. ESCORTS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, DELHI - 2003 (3) TMI 564 - CEGAT, NEW DELHI

Mr. Raju, Member (Technical)

Shri SV Nair, Asst. Comm. (AR) for appellant

Shri Narayanan, Advocate for respondent

ORDER

The appellant, M/s. Bharat Forge Ltd., installed a machine in their plant for doing job-work for their clients. For doing such job work they were manufacturing dies in their premises and using the same captively. They were also using certain inputs and capital goods while doing the job work for others. The said machine was used exclusively for doing job work for others. Show cause notices were issued to M/s. Bharat Forge Ltd. for recovery of Cenvat Credit availed on the sinputs used for the manufacture of dies and for the purpose of job work on the ground that the job work activities were exempted under Notification No.214/86-CE dated 25/03/86. The show-cause notices were adjudicated and in four cases demand for recovery of Cenvat Credit was confirmed along with interest. Penalty was also imposed under Section 11AC of the Central Excise Act. In one case the Commissioner (Appeals) granted relief by setting aside the order of Additional Commissioner confirming the demand. Thus, in four cases M/s. Bharat Forge Ltd., is in appeal against the confirmation of demand by the Commissioner (Appeals) and in one case, the Revenue is in appeal against the dropping of demand by the Commissioner (Appeals).

2.  The learned Counsel for M/s. Bharat Forge Ltd., argued that the entire issues has been settled by the Larger Bench of the Tribunal in the case of Sterlite Industries (I) Ltd.,- 2005 (183) ELT 353 (Tri-LB). He argued that in the said case the Larger Bench of the Tribunal had held that the provisions of Rule 57C of the Modvat credit rules would not be attracted to a job work situation where the principal manufacturer undertakes to pay duty. He argued that the goods manufactured on job work basis filing exemption under Notification No. 214/86 are not exempted goods in true sense. In case of these goods the duty is just deferred and liability is fixed on the principal manufacturer. He argued that the decision of the Larger Bench of the Tribunal in the case of Sterlite Industries (I) Ltd. (supra) has been upheld by the Hon'ble High Court of Mumbai as reported in 2009 (244) ELTA89.

3.  The learned AR for the Revenue argued that the Notification is very clear and no credit is admissible when inputs are used for the manufacture of exempted goods and when the capital goods are used exclusively for the manufacture of exempted goods. He argued that the goods in this case were  fully exempted and therefore, they were hit by the mischief of Rule 6 (1) & 6 (4) of the Cenvat Credit Rules, 2004.

4.  I have gone through the rival submissions. I find that the Larger Bench of the Tribunal in the case of Sterlite Industries (I) Ltd. (supra) has observed as follows:

4. In only case of Escorts Ltd. v. CC Ex, Delhi [2003 (160) E.L.T. 623 (Tri-Del.)] while interpreting Rule 57C of the Central Excise Rules, the Tribunal rejected the appellants claim of Modvat credit of duty paid on the inputs used in the manufacture of the parts, which were cleared without payment of duty to, appellant's other unit under Chapter X procedure and utilised in the manufacture of tractor which were cleared on payment of duty by observing that since no duty was paid on the part at the time of clearance, Rule 57C will apply and no Modvat credit would be admissible. However, the said decision was subsequently reversed by the Supreme Court as reported in Escort v. C.C.Ex. [2004 (171) E.L.T. 145 (S.C.)]. For appreciation, we reproduce paragraphs 8 & 9 of the said decision.

“8. It is to be seen that the whole purpose of the Notification and the Rules is to streamlines the process of payment of duty and to prevent the cascading effect if duty is levied both on the inputs and the finished goods. Rule 57D(2), which has been extracted hereinabove, shows that in the manufacture of a final product an intermediate product may also come into existence. Thus in cases where intermediate product may also come into existence. Thus in cases where intermediate product comes into existence, even though no duty has been chargeable to Nil rate of duty, credit would still be allowed so long as duty is paid on the final product.

9. In cases of manufacturers like the Appellants the final product is the tractor. The intermediate product would be parts which are manufactured for being used in the tractor. In such a case the parts would not be the final product. Thus Rule 57C would have no application. The mere fact that the parts are cleared from one factory of the Appellants to another factory of the Appellants would not disentitle the Appellant from claiming benefit of Notification No. 217/86-C.E., dated 2nd April, 1986. As stated above, the Notification itself clarifies that the inputs can be used within the factory of production or in any other factory of the same manufacturer.”

By applying the ratio of the above decision, it becomes clear that Modvat credit of duty paid on the inputs used in the manufacture of final product cleared without payment of duty for further utilisation in the manufacture of final product, which are cleared on payment of duty by the principal manufacturer, would not be hit by provision of Rule 57C. Inasmuch as, the matter stands decided by the Honourable Supreme Court, we would hold in favour of assessee.”

5. The said decision of the Tribunal has been upheld by the Hon'ble High Court as reported in 2009 (244) ELT A89 (Bom). In this case it is undisputed that the goods have been used as inputs or capital goods for the processing of material on job work basis under Cenvat Credit Rules. In such circumstances, the ratio of the decision of the Tribunal in the case of Sterlite Industries (I) Ltd. case is squarely applies in this case. The appeals of M/s. Bharat Forge Ltd., are allowed and the appeal of the Revenue is dismissed.

(Pronounced in Court on 25/04/2016)

 
 
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