P.G. Chacko, Member (Judicial)
These applications seek waiver of predeposit and stay of recovery in respect of duty and penalty amounts. After examining the records and hearing both sides, I am inclined to dispose of the appeals finally, as the common issue arising therein is already covered by a decision of the Tribunal's Larger Bench and subsequent decisions including a decision of this Bench. Ld.SDR has preferred to get the appeals heard on a future date, but I am not inclined to accept the suggestion inasmuch as it has not been shown by ld.SDR that the case law cited by ld.counsel has been appealed against by the department.
2. During the periods of dispute, the appellants had manufactured machine forgings on job work basis and supplied the goods to the principal manufacturers without payment of duty. The principal manufacturers, after requisite further processing, cleared the goods on payment of duty. The appellants were also manufacturing similar goods on their own, which were cleared on payment of duty to independent buyers. In such duty payment, they utilized CENVAT credit on capital goods and inputs which were used in the manufacture of the job-worked goods. The department objected to this. They issued show-cause notices alleging that as the inputs had been used in the manufacture of final products which were cleared without payment of duty, any CENVAT credit of the duty paid on such inputs would not be available to them. Similarly, it was alleged that, as the capital goods were used exclusively in the manufacture of such final products, no CENVAT credit of the duty paid thereon would be available. The original authority sustained these allegations and ordered recovery of the CENVAT credits in question with interest thereon. In two cases, it imposed penalties also on the assessee. The appeals filed by the party against the orders of the original authority were dismissed by the Commissioner (Appeals). Hence the present appeals.
3. It is submitted by ld.counsel for the appellants that this Bench has, in a similar case, held against the Revenue. He has placed on record a copy of Final Order No.1536/05 dated 7.12.2005 passed by this Bench in appeal No.E/1249/2004 reported as CCE Chennai Vs Ucal Machine Tools Ltd., 2006-TIOL-76-CESTAT-MAD. Ld.SDR has relied on the Tribunal's decision in CCE Indore Vs Surya Roshni Ltd., 2003 (155) ELT 481 (Tri.-Del.). He has also pointed out that the civil appeal filed by M/s.Surya Roshni Ltd. against the Tribunal's order was dismissed by the apex court vide Surya Roshni Ltd. Vs Commissioner, 2007 (158) ELT A 273 (SC).
4. After giving careful consideration to the submissions, I note that the question whether CENVAT credit on capital goods and inputs used by a job worker for/in the manufacture of final products returned, without of payment of duty, to the principal manufacturer under Rule 57F (3) procedure is admissible to the job worker is already covered against the Revenue by the decision of this Bench in the case of Ucal Machine Tools (supra). In that case, this Bench relied on the Tribunal's Larger Bench decision in Sterlite Industries (I) Ltd.Vs Commissioner, 2005 (183) ELT 353 and the decision of the West Zonal Bench in the case of Ispat Metallics Ltd. Vs CCE 2005 (70) RLT 195 (CESTAT-Mum.) also. Paragraphs 3 & 4 of Final Order No.1536/2005 ibid are reproduced below:-
'3. After giving careful consideration to the submissions, I find that the Larger Bench did not recognize job-worked goods as 'exempted goods' for purposes of Rule 57C, which provision mandated that no credit of duty paid on inputs shall be allowed where the final product manufactured out of such input was wholly exempted from the payment of duty of excise leviable thereon or was chargeable to 'nil' rate of duty. It was observed that, in the special procedure laid down under Rule 57F(3), duty did not get paid at the job worker's end at the time of clearance of goods, but ultimately got paid at the principal manufacturer's end. In other words, assessable value of the goods cleared by the job worker without payment of duty to the principal manufacturer would ultimately become an ingredient of the assessable value of the final product cleared by the latter on payment of duty. Thus, duty gets paid on the job-worked goods at a later stage and, therefore, such goods cannot be categorized as 'exempted goods' for purposes of Rule 57C or Rule 57R. Thus, the Larger Bench decision operates in favour of the respondents.
4. Support also could be legitimately claimed by the respondents from the division bench decision in Ispat Metallics Ltd. (supra) also. The term 'used' occurring in the definition of capital goods was examined by the Bench as under:-
'After determining as above, we find the word 'used' in the definition of capital goods will not and cannot be interpreted to mean that it should be actually in use. The potential use by the manufacturer, at a later date would also entitle the credit. The exclusive use as already held, is not contemplated. The plant in this case is capable for use for converting the iron or fines to be used by the appellants at a future date. The word 'used' can denote be intermittent and or use sometime in future; we find that both sides agree that the appellants are a manufacturer of declared final products iron and steel and have the capacity or potential to use iron ore fines also. Therefore, credit as over led cannot be denied.'
In the instant case, it has been submitted on behalf of the respondents that the capital goods in question might be used, at some time in future, for manufacturing piston valves or other parts of IC Engine otherwise than on job work basis and the products so manufactured might be cleared on payment of duty. In such an eventuality, the capital goods in question would be eligible for Modvat credit. Then alone will the credit in question be utilized. In the event of the respondents not using the capital goods for manufacture of dutiable goods at any time in future of closing down their factory, the credit would lapse. These submissions of learned Consultant are acceptable.'
5. Ld.SDR has made an endeavour to distinguish the present case from the case of Ucal Machine Tools Ltd. by submitting that the relevant provisions of the CENVAT Credit Rules, 2004 are not similar to those of Rule 57C of the erstwhile Central Excise Rules, 1944 which was considered in the cases cited by ld.counsel. After a perusal of the rules, I have found complete parity between the provisions of the CENVAT Credit Rules, 2004 and those of the erstwhile Central Excise Rules, 1994. The basic question is whether the job-worked goods cleared by the appellants to the principal manufacturers can be considered to be goods exempted from the whole of duty of excise or chargeable to nil rate of duty. This question was considered in the case of Ucal Machine Tools (supra) and decided in favour of that party. There is no claim before me that the decision in Ucal Machine Tools (supra) has not been accepted by the department. Hence it has to be held that the machine forgings (job-worked goods) cleared by the appellants to the principal manufacturer during the periods of dispute, without payment of duty, were not to be trea
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ted as goods exempted from duty of excise or chargeable to 'nil' rate of duty so as to attract the bar created under Rule 6(1) of the CENVAT Credit Rules, 2004. It is ordered accordingly. 6. In appeal No.E/46/2007, there is another small issue which relates to capital goods credit of Rs.17,136/-. This credit had been taken on certain inputs which were not received in the factory. After examining the records and considering the submissions, I note that the non-receipt of the said inputs is an admitted fact and that the credit in question was reversed by the party. The decision of the lower authorities to deny this credit to the assessee has to be sustained. It is ordered accordingly. 7. In the result, appeal Nos.E/45 & 54/2007 are allowed and appeal No.E/46/07 is partly allowed.