Case Law Details
Rama Ferro Alloys & Finance Private Limited Vs Commissioner of CGST & CX (CESTAT Kolkata)
Introduction: The case of Rama Ferro Alloys & Finance Private Limited Vs Commissioner of CGST & CX brought forth a significant ruling from the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Kolkata. The case revolved around the utilization of cenvated inputs during job work and resulted in a significant verdict, setting aside an excise duty demand.
Analysis: Rama Ferro Alloys & Finance Private Limited, a manufacturer of excisable goods, also undertook job work for Modern India Concost Ltd., using some cenvated inputs of their own. Upon completion, the processed goods were sent back to the principal manufacturer, who then exported the goods. However, a Show Cause Notice was issued, alleging wrongful availing of CENVAT Credit, leading to the confirmation of a demand by the Adjudicating authority and the imposition of an equal penalty.
However, the CESTAT Kolkata observed that the appellant followed the procedure laid down in Rule 4(5)(a) of the CENVAT Credit Rules, 2004. The processed goods were neither ‘exempted goods’ nor chargeable to ‘NIL rate’ goods, but exported under the cover of a B-17 Bond. Therefore, the Appellant argued that no duty reversal/payment arises. The CESTAT Kolkata found the appellant’s utilization of the cenvated inputs in processing of goods in course of job work to be regular, setting aside the excise duty demand.
Conclusion: The CESTAT Kolkata’s ruling in the case of Rama Ferro Alloys & Finance Private Limited Vs Commissioner of CGST & CX underlines the critical nuances of utilizing cenvated inputs during job work. It provides valuable insights for manufacturers undertaking job work and emphasizes the importance of adherence to the prescribed procedures for availing CENVAT Credit.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The facts of the case in brief are that the Appellant is a manufacturer of excisable goods and also undertook job-work on the materials supplied by the principal M/s. Modern India Concost Ltd., an EOU under the cover of job-work challan as prescribed under Rule 4(5)(a) of the CENVAT Credit Rules, 2004 by observing all formalities in this regard. While undertaking such job-work the Appellant also used certain cenvated inputs of their own. On completion of such job work the Appellant sent back the processed materials under the cover of job work challans to their principal manufacturer, who ultimately exported such goods under the cover of B-17 Bond. Show Cause Notice dated 29.04.2016 was issued alleging that the Appellants have contravened the provisions of Rules 3 & 4 of the CENVAT Credit Rules, 2004 inasmuch as they have wrongly availed the CENVAT Credit of Rs.6,24,849/- including Cess during the period from April 2011 to July 2011, on inputs which were used for manufacture of processed goods on behalf of another manufacturer on job work basis. The Adjudicating authority confirmed the demand as proposed in the Show Cause Notice and also imposed penalty of equal amount under Section 11AC of the Central Excise Act, 1944 read with Rule 15 of the CENVAT Credit Rules, 2004. On Appeal, the Ld.Commissioner(Appeals) rejected the Appeal before him. Hence the present appeal before the Tribunal.
2. Heard both sides and perused the Appeal records.
3. I find that the Appellant undertook job work on the raw materials supplied by the manufacturer-exporter and received them under the cover of prescribed Challans in terms of Rule 4(5)(a) of the CENVAT Credit Rules, 2004. While undertaking such job work, the Appellant also used certain inputs of their own on which CENVAT Credit was taken by them. Such processed goods were sent back to its principal supplier under the cover of Challans. That in the matter of job-work, the principal manufacturer or supplier of raw materials was a 100% export oriented unit, who upon receipt of goods after due processing undertook export. Finally goods meant for export are neither ‘exempted goods’ nor chargeable to ‘NIL rate’ goods, but exported under the cover of B-17 Bond. The whole exercise was in conformity with the procedure laid down in Rule 4(5)(a) of the Rules. Ultimately the resultant goods were exported under the cover of B-17 Bond. It is the case of the Department that the amount of CENVAT Credit involved in the inputs which were used by the Appellant from their own stock, by alleging that no duty was payable by the Appellant at the time of removal of such processed goods. It is the case of the Appellant that the reversal/payment of amount of credit is mandatory only when the final products are either exempted from the whole of duty of excise leviable thereon or chargeable to NIL rate of duty. But the final products which are exported under the coverage of B-17 Bond do not fall in either exempted or nil rate of duty category. Therefore, no duty reversal/payment arises in the facts of the present case. In support of their submissions, they have relied upon the decision of the Tribunal in the case of Svizera Labs Pvt.Ltd. vs. CCE, Navi Mumbai [2020 (374) ELT 595 (Tri-Mumbai)]. The short issue involved in the present appeal for consideration is whether the Appellant is entitled to credit of duty paid on inputs received under Rule 4(5)(a) of the CENVAT Credit Rules, 2004. This issue has been considered at length by the Larger Bench of the Tribunal in the case of Sterlite Industries (I) Ltd. vs. CCE, Pune [2005 (183) ELT 353 (Tri.-LB)] in the context of old provisions which were later upheld by the Hon’ble Bambay High Court. No contrary decision has been placed by the Revenue. The proviso to Rule 4(5)(a) is pari materia with the provisions discussed in the said judgement. Hence, the ratio laid down is squarely applicable to the facts of the present case. I find that the ratio laid down by the Tribunal is squarely applicable to the facts of the present case even if the goods were ultimately exported when one takes into consideration the provisions contained in Rule 6(6) of CENVAT Credit Rules, 2004.
4. In view of the above decisions of the Tribunal, it is my considered view that there was no irregularity on the part of the Appellant in utilizing the cenvated inputs in the processing of goods in course of job work undertaken by them. Moreover, there was no contravention of any statutory provisions. In view of the above discussions, the impugned orders cannot be sustained and are therefore set aside. The Appeal filed by the Appellant is allowed with consequential relief, if any as per law.
(Order pronounced in the open court on 07 June 2023.)
