Custom, Excise & Service Tax Tribunal
M/S. Bharat Heavy Electricals Ltd vs Cce & S.T.- Meerut-I on 31 October, 2013
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH NEW DELHI,
COURT - II
Date of Hearing: 01.10.2013
Date of Decision: 31.10.2013
Stay Application No. E/Stay/55510/2013 in
Appeal No. E/55412/2013-EX[DB]
[Arising out of Order-In-Original No.43-44/COMMR./MRT-I/2012 dt. 30.11.2012, passed by Commissioner, Customs and Central and Excise, Meerut-I]
For approval and signature:
Honble Shri D.N.Panda, Judicial Member
Honble Sh. Rakesh Kumar, Technical Member
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Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
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Whether Their Lordships wish to see the fair copy of the Order?
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Whether Order is to be circulated to the Departmental authorities?
M/s. Bharat Heavy Electricals Ltd. Appellant
Vs.
CCE & S.T.- Meerut-I Respondent
Present: - Sh. Rupesh Kumar, Advocate - for the Appellant Sh. S.K.Panda, Jt. CDR- for the Respondent Coram : Honble Shri D.N.Panda, Judicial Member Honble Shri Rakesh Kumar, Technical Member FINAL ORDER NO: 58139 /2013 Per Rakesh Kumar:-
The facts leading to this appeal and stay application are, in brief, as under:-
1.1 The Appellant is manufacturer of Turbine and Electricity Generating Sets chargeable to Central Excise Duty. They availed Cenvat Credit of excise duty paid on inputs and capital goods used in or in relation to manufacture of their final products. The period of dispute in this case is from Oct.2006 to March2011 and April 2011 to Jan.2012. During this period the Appellant were receiving certain excise duty paid inputs in respect of which they were availing the Cenvat Credit and thereafter, they were sending the Cenvat Credit availed inputs to their job workers without reversing the Cenvat Credit, in terms of the Provisions of Rule 4(5)(a) of Cenvat Credit Rules, 2004. The job workers processed the inputs received free of charge from the Appellant and in course of processing used some of their own inputs in respect of which they had taken the Cenvat Credit. The processed inputs (intermediate products) were cleared by job workers to the Appellant on payment of duty on value equal to the cost of input supplied free of charge by the Appellant (excluding the excise duty whose credit has been taken by the Appellant) plus the job charges, including the cost of their own material used without availing Cenvat Credit on the value of free supply of input made by the appellant. These clearances of processed inputs(intermediate products) were made by the job workers under invoices issued to the Appellant and on the basis of these invoices, the Appellant took the Cenvat Credit of the duty paid by the job workers. The Department was of the view that by this modus operendi, the Appellant availed Cenvat Credit in respect of the same inputs twice - first at the time of receiving the inputs in their factory before sending the same to job workers and thereafter second time at the time of receiving intermediate products from the job workers on which the job workers had paid duty on the value which included the value of the free supply inputs. On this basis, two Show Cause Notices were issued to the Appellant 1st Show Cause Notice issued was for recovery of credit amounting to Rs. 3,70,88,891/- for the period from Oct,06 to March11 and 2nd Show Cause Notice was for recovery of credit amounting to Rs.1,01,89,075/- for the period from April11 to Jan 2012. Both the Show Cause Notice sought recovery of interest on the Cenvat Credit alleged to have been wrongly taken, under Rule 14 of the Cenvat Credit Rules 2004 read with Section 11AB of Central Excise Act, 1944 and also sought imposition of penalty on the Appellant under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944. The First Show Cause Notice was issued invoking extended period under Proviso to Section 11 A(1) of the Central Excise Act.
1.2 Both the Show Cause Notices were adjudicated by the Commissioner vide order-in-original No. 43-44/2012 dt. 13.09.12 by which the above two Cenvat Credit demands were confirmed against the Appellant along with interest U/S 11AB and penalty of equal amount was imposed under Rule 15(2) ibid. Against this order of the Commissioner, this appeal has been filed along with stay application.
1.3 Though the stay application had earlier been listed for hearing on 2nd November 2013, on mention that this appeal involves only a short point of law and the issue is recurring issue, the Bench was of the view that the matter can be heard for final disposal. Accordingly, the Bench ordered for listing of the matter for final hearing on 01.10.2013 and the Department was directed not to take coercive measures for the recovery in the mean time.
2. Heard both the sides.
3. Sh. Rupesh Kumar, Advocate, learned counsel for the Appellant, pleaded that the Cenvat Credit availed inputs had been sent by the Appellant to their job workers without reversing the Cenvat Credit, which is permissible under Rule 4(5)(a) of the Cenvat Credit Rules, 2004, subject to the condition that the inputs after being processed, are returned back within 180 days, and there is no condition in Rule 4(5)(a) that the job worker must necessarily avail duty exemption under notification No. 214/86-CE dt. 25.03.1986, that in this case the job workers instead of availing exemption under Notification No. 214/86-CE, had paid duty on the intermediate products manufactured by them and had cleared the same to the Appellant under their invoices and the duty so paid by the job workers was on the value equal to the cost of inputs supplied to them excluding excise duty plus job charges plus cost of the job workers own materials used and that since the intermediate products were duty paid and cleared under the invoices issued by the job workers, the Appellant took Cenvat Credit of the duty paid by the job-workers and just because in respect of the inputs which were processed by the job workers into intermediate products, Cenvat Credit had been taken by the Appellant, Cenvat Credit of duty paid on the intermediate products cannot be denied to the Appellant, as the inputs have suffered duty twice- first in the hand of input manufacturers from whom the Appellant had procured the inputs and second time in the hand of the job workers as part of the value of intermediate products manufactured by them. He further pleaded that in any case, the intermediate products manufactured by the job-workers are products different from the inputs and therefore, Cenvat Credit of the duty paid on the same cannot be denied to the Appellant. In view of the above submissions, it was prayer of the Appellant that impugned order is contrary to the Provisions of the Law and hence the same is not sustainable.
4. Sh. S.K.Panda, learned Jt. CDR, on behalf of Revenue, defended the impugned order by reiterating the findings of the Commissioner and pleaded that the Appellant has taken Cenvat Credit on the same inputs twice - first at the time of the receiving the inputs from the input manufactures and thereafter at the time of receiving the intermediate products manufactured out of those inputs by the job workers, and that the Appellant, while clearing the Cenvat Credit availed inputs to job workers should have reversed the Cenvat Credit. He pleaded that availing the Cenvat Credit on the same inputs twice is contrary to the Provisions of the Law; that the job-workers may be having accumulated Cenvat Credit and for this reason they may have chosen to pay duty instead of availing the Exemption Notification No. 214/86-CE, and that in view of these submissions, there is no infirmity in the impugned order.
5. We have considered the submissions from both the sides and perused the records.
6. The Appellant, had been receiving the duty paid inputs and had availed the Cenvat Credit in respect of the same. These Cenvat Credit availed inputs were, thereafter, sent to their job workers under Rule 4(5)(a) of the Cenvat Credit Rules, 2004 without reversal of the credit for being processed into intermediate products. In this regard Rule 4(5)(a) is reproduced as under for appreciation of object of the grant of the Cenvat Credit:-
(5)(a) the Cenvat Credit shall be allowed even if any inputs or capital goods as such or after being partially processed are sent 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 eight days of their being sent to a job worker and if the inputs or the capital goods are not received back within one hundred eight days, the manufacturer or provider of output service shall pay an amount equivalent to the Cenvat Credit attributable to the inputs and he can take the Cenvat Credit again when the inputs or capital goods are received back in his factory or in the premises of the provider of output service.
7. Thus on perusal of the above Rule, it is clear that a manufacturer who has availed Cenvat Credit in respect of inputs, can send those inputs to his job worker for further processing, testing, repair, re-conditioning etc. or for manufacture of intermediate goods necessary for the manufacture of final products or for any other purpose, provided the processed inputs or intermediate products are returned back within a period of 180 days. There is no condition that for availing the facility of this Rule, the job worker should avail full duty exemption under Notification No.214/86-CE. There is no dispute that intermediate products made out of the inputs supplied by the Appellant were received back from the job workers within the stipulated period. The only point of dispute is as to whether the Appellant would be eligible for Cenvat Credit of the duty paid by the job workers on the intermediate products which had been paid on the value equal to the cost of the free supply inputs excluding excise duty (the credit of which had been taken by the Appellant) plus job charges plus value of any other inputs of their own used by the said job workers for manufacture of the intermediate products. The Department seeks to deny the Cenvat Credit of the duty on the intermediate product paid by the job-workers on the ground that on the same inputs, Cenvat Credit cannot be availed twice - first at the time of receipt the inputs by the Appellant in their factory from the input manufacturers and second time in respect of duty paid on intermediates goods made out of input supplied by Appellant upon receiving the same from the job workers. Logically, the ground on which the Cenvat Credit is sought to be denied is totally incorrect. There is no condition in Rule 4(5)(a) of the Cenvat Credit Rules, 2004 that job worker should necessarily avail of full duty Exemption under Notification No.214/86-CE. This exemption being a conditional exemption, is not required to be compulsorily availed by job-workers. If the job worker decides to pay the duty on the intermediate products manufactured by him on job work basis for the principal manufacturer, in terms of the judgment of the Apex Court in case of Ujagar Prints Vs. Union of India, reported in 1989(3) ELT-439 (SC), they would be required to pay duty on the cost of input plus job charges including the cost of their own inputs used in manufacture. This is what the job workers have done in the present case. Moreover when the inputs, in question, have suffered twice, first in the hand of input manufacturers from whom the Appellant had procured the inputs and second time in the hand of job workers who at the time of clearance of intermediate products made out of the inputs paid duty on value which included the cost of the inputs, the credit of the duty paid on the intermediate product cannot be denied when such intermediate were made out of those inputs, even if the Appellant had earlier taken the Cenvat Credit in respect of inputs while receiving the same. In any case, the intermediate products made out of inputs are different from inputs and just because the Appellant have availed Cenvat Credit in respect of the inputs, the Cenvat Credit of duty, if any paid on the intermediate products by the job-workers, cannot be denied to the principal manufactures.
8. In view of the above discussion, the impugned order is not sustainable. The same is set aside and the appeal as well as stay application are allowed.
(Order Pronounced in the open court on 31.10.2013)
(D.N.Panda) Member (Judicial)
(Rakesh Kumar) Member (Technical)
S.Kaur
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