- (1.) This appeal has been preferred by the revenue under Section 35G of the Central Excise Act, 1944 against order dated 30-12-2009; 2010 (261) E.L.T. 1015 (Tribunal) passed by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi (for short 'the Tribunal') claiming following substantial questions of law: (i) Whether the provisions of Rule 6 of the CENVAT Credit Rules, 2001 & 2002 does not debar a unit from taking credit of duty on the quantity of inputs used in the manufacture of job worked goods cleared without payment of duty? (ii) Whether the Id. CESTAT is correct in allowing the CENVAT Credit by placing reliance on the decision of the Id. CESTAT in the case of Sterlite Industries (I) Ltd. v. C.C.E. Pune, 2005 182 ELT 353 (Tri.) without taking into cognizance the provisions of Rules 2(d), 2(f), 3 and 4(5)(a) of CENVAT Credit Rules, 2001 & Rule 2(e), 2(g), 3 & 4(5)(a) of CENVAT Credit Rules, 2002?
(2.) The Assessee is manufacturer of wool tops and woolen yarn falling under Chapter 51 of the Schedule to the Central Excise Tariff Act, 1985 and is availing CENVAT credit under the CENVAT Credit Rules, 2002. Along with its own manufacturing it also does job work for other manufacturers. It availed CENVAT credit on inputs i.e. lubricants, soaps, chemical etc. utilized in manufacture of their own goods as well as processing of goods on job work. Show cause notice was issued to the Assessee proposing recovery of amount claimed by the Assessee as CENVAT credit on the ground that CENVAT credit granted on the inputs amounted to availing of such credit on duty free goods. The demand was dropped by the Adjudicating Authority vide order-in-original dated 14-2-2006. It was observed that there was an amendment to Rules from 1-4-2003 allowing benefit of CENVAT credit on inputs used by the job workers. It was further observed as under: As per said circular in para A(h), Processors who undertake job work and also do processing on their own and obtain dye and chemicals can take credit of duty paid on such dyes and chemicals even if some of these inputs were used in making goods cleared without payment of duty under the job work scheme. Illlln the light of these changes in the CENVAT Credit Rules, the credit of inputs on chemicals etc. taken by the noticee is admissible. As regards, the inputs namely soaps & Lubricants is concerned, it is observed that simplified procedure has been laid down under Rule 12B for job work in Textile & Textile articles. Under the proviso to Sub-rule 1 of Rule 6 of CENVAT Credit Rules, the CENVAT credit on inputs shall not be denied to job worker referred to Rule 12B on the ground that the said inputs were used in the manufacture of goods cleared without payment of duty under Rule 12B. Since the noticee has undertaken the job work process within the provisions of Rule 12B under the new excise procedures on textile & Textile articles, the relaxation in the obligation of manufacture of dutiable & exempted goods provided under the Sub-rule 1 of the Rule 6 is available to the noticee. In view of the above discussion, I find that the noticee has correctly taken the credit on inputs & the same was admissible.
(3.) The above view has been upheld by the Commissioner (Appeals) as well as the Tribunal. The Tribunal followed the judgment of its Larger Bench in Sterlite Industries (I) Ltd. v. Commissioner of Central Excise, Pune, 2005 182 ELT 353 (Tri.). The Larger Bench followed the judgment of Hon'ble Supreme Court in Escort v. C.C. Ex, 2004 171 ELT 145 (S.C.) holding that clearing of goods at intermediate stage was not at par with clearing of final goods without payment of duty and CENVAT credit could not be denied on inputs on that ground. Appeal against the judgment in Sterlite was dismissed by Bombay High Court.;