Cenvat Reversal by Job worker availing N/No. 214/86 exemption

Job worker enjoying exemption under Notification No. 214/86 not liable to reverse Cenvat credit as the duty on job worked goods ultimately paid by principal manufacturer

(Arising out of Order-in-Original No. 42/MS (31)/Commr/Rgd/ 06-07 dated 29.03.2007 passed by Commissioner of Customs & Central Excise, Raigad)

Brief of the case :

• The CESTAT Mumbai in the case of Precision Metals vs. CCEx held that as per the special procedure prescribed in Notification no. 214/86 job worker can get duty exemption in respect of job worked goods cleared to principal manufacturer but this exemption donot make the goods as exempt from duty because ultimately duty got paid at the principal manufacturer send at the time of clearance of job worked goods.
• Therefore, the Cenvat credit on inputs used by job worker cannot be said to be used in the manufacture of exempted goods.

Facts of the case:

• The assessee is engaged in the manufacture of iron and steel products falling under Chapter 73 of the Central Excise Tariff Act, 1985 and is availing and utilizing credit of duty paid on inputs and capital goods as well as credit of service tax paid on input services.
• The adjudicating authority confirmed the demand in respect of wrongly availed Cenvat credit i.e. 10% of the value of the goods manufactured and cleared under Notification No. 214/86 on the ground that the goods so manufactured on jobwork basis is exempted from payment of excise duty therefore in terms of Rule 6 of Cenvat Credit Rules, 2004 the appellant is liable to pay 10% of the value of exempted goods. Aggrieved assessee is in appeal before the tribunal.

Contention of the Assessee: