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2009 (8) TMI 865

..... Rule 4(5)(a) of CCR, 2004? - E/320-321/2009 - S/278-279/2009-WZB/C-III/EB - 11-8-2009 - S/Shri A.K. Srivastava, Ashok Jindal, JJ. REPRESENTED BY : Shri T. Vishwanathan, Advocate, for the Appellant. Shri P.K. Agarwal, SDR, for the Respondent. [Order per : A.K. Srivastava, Member (T)]. - There are two applications filed in the present proceedings for waiver of pre-deposit of duties of Rs. 27,75,460/- and Rs. l1,81,524/-and equivalent amount of penalties and also interest for the period Feb 07 to Dec 07 and Jan 08 to April 08 respectively. The basic issue involved in the present appeals/applications is whether the Cenvat Credit shall be allowed on the inputs used by the job worker (i.e, the Applicants M/s. TATA Motors Ltd.,) in the processing of goods received under Rule 4(5)(a) of Cenvat Credit Rules, 2004. 2. We have heard both sides and have also taken into consideration their written submissions. The main contention of the Ld. Counsel of the Applicants is that the present issue is covered by the decision of Hon ble Larger Bench of CESTAT, New Delhi in the case of Sterlite Industries (I) Ltd. v. C.C.E., Pune [2005 (183) E.L.T. 353(Tri.-L.B.)]. This contention was vehemently op .....

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..... of excise on any final product; or (b) an amount equal to Cenvat credit taken on inputs if such inputs are removed as such or after being partially processed; or (c) an amount......................... (d) an amount under sub rule 2 of Rule 16 of Central Excise Rules, 2002; or (e) service tax on any output service. Rule 4(5)(a) - The Cenvat credit shall be allowed even if any inputs or capital goods as such or after being partially processed are ent to a job worker for further processing, testing, repair, re-conditioning, or for the manufacture of intermediate goods necessary for the manufacture of final products or any other purpose, and it is established from the records, challans or memos or any other document produced by the manufacturer or provider of output service taking the CENVAT credit that the goods are received back in the factory within one hundred and eighty days of their being sent to a job worker and if the inputs or the capital goods are not received back within one hundred eighty days , the manufacturer or provider or output service shall pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods by debiting the C .....

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..... ker cannot be treated as the inputs for M/s. FIAPL for the purpose of availing the Cenvat Credit. The Ld. Counsel of the Applicants submitted that the matter can be looked at from another angle i.e., by resorting to clearance of the paints (on which the credit has been taken) under Rule 3(5) to M/s. FIAPL on reversal of Credit taken on inputs, to which M/s. Tata Motors is entitled. M/s. FIAPL are entitled to take Credit of the duty reversed by the Applicants and M/s. FIAPL can in turn send the paints to the Applicants under Rule 4(5)(a). This submission cannot be accepted for the simple reason that there is no question of any assumptions or presumptions, as the Applicants have not resorted to the facility provided under Rule 3(5) as contended. 5. The Ld. SDR has tried to distinguish the facts and law in M/s. Sterlite Industries case and quoted para 2 of the decision of Hon ble CESTAT Larger Bench in Sterlite Industries case. 2. The revenue is denying the Modvat credit to the present job worker on the grounds that the inputs were used in the manufacture of the goods which were cleared without payment of duty. Pausing here for a second, let us take a situation where the bas .....

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..... age employed in a statute is the determinative factor of legislative intent...... He also submitted that the Cenvat Credit Rules have been made under the powers conferred under Section 37 of the CE Act, 1944. In relation to the interpretation of the Rules relating to Cenvat/Modvat credit, he submitted that Hon ble High Court of Himachal Pradesh has clearly held in the following decisions that compliance with the Rules is mandatory and every word used in the Rule shows the legislative intent. Non compliance of the Rules will lead to denial of benefit of Modvat/Cenvat Credit. (i) CCEx, Chandigarh v. Karam Chand Appliances - 2009 (238) E.L.T. 706 (H.P.) (ii) CCEx v. Spectra Electronics - 2009 (235) E.L.T. 795 (H.P.) 6. We have gone through the above decisions. We find that the Cenvat Credit Rules, 2004 as mentioned supra, clearly provide for the availment and utilization of the Cenvat credit by the manufacturer of the final product. Admittedly, M/s. Tata Motors are a job worker and not the manufacturer of the final product (car) in the instant case. Since the inputs i.e. the paints are not used in the manufacture of final product by M/s. FIAPL, no credit can bw allowed to the job .....

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..... ct as it is exempted from whole of the duty or is 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 57 C would have not 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 Appellants 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 . 7. In the present case, we find that the Applicants and the principal manufacturer are not the same, as there are no two factories involved herein of the same manufacturer. Accordingly, we respectfully feel that the principles laid down by Hon ble Supreme Court in Escorts case (supra) have not been applied correctly in Sterlite case. Rules cannot be given a go by .....

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..... the Ld.Counsel has mentioned in his written submissions that if the job worker clears the goods under Rule 3(5) on reversal of Cenvat Credit, the principal manufacturer can avail credit. This further strengthens the view that the Cenvat Credit can be taken only when the resultant product is cleared on payment of duty or on reversal of the Cenvat Credit. We agree with the arguments of the Ld. SDR that compliance with the Rules is mandatory (even if it is mechanical and involves additional paper work) and non-compliance will result into denial of the Cenvat Credit. 9. In view of the above, and following the settled principles of law laid down by the Higher Courts i.e., Hon ble Apex Court and Hon ble High Court of Himachal Pradesh (supra), we find that the Applicants in this case have not made out a irresistible case for the waiver of the full amount of duties, interest and penalties. They have also not pleaded any financial hardship. 10. Accordingly, taking into consideration the facts and circumstances of the case as discussed above, and bearing the interest of revenue in mind, we direct the Applicants to deposit full amount of duties i.e., Rs. 27,75,460/- and Rs. 11,81,5 .....

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