Case Law Details
GlaxoSmithKline Consumer Healthcare Ltd. Vs Commissioner of GST & Central Excise (CESTAT Chennai)
The appeals were filed by different entities but involved a common issue and were therefore heard together and disposed of through a common order. The dispute arose from an agreement between a manufacturer and a job worker, under which the job worker received products in bulk, repacked them into smaller quantities, and returned the finished goods to the manufacturer after payment of duty on the abated MRP value. The job worker received conversion charges for this activity, while the manufacturer supplied capital goods such as plant and machinery, which were installed at the job worker’s premises.
During an audit, the Revenue observed that the capital goods used at the job worker’s premises were purchased and capitalized by the manufacturer. However, the job worker had availed CENVAT credit on these capital goods, despite the invoices being issued in the manufacturer’s name. The Revenue contended that such credit was wrongly availed because the job worker neither owned the goods nor paid for them, and the invoices were not issued in its name. This led to the issuance of a show cause notice proposing recovery of the allegedly ineligible credit along with interest and penalties, invoking the extended period of limitation on the ground of non-disclosure.
The adjudicating authority confirmed the demand and imposed penalties. Subsequent proceedings for a later period also upheld similar findings, leading to further appeals.
The Tribunal examined three key issues: whether the extended period of limitation was validly invoked, whether there was a violation of Rule 9 of the CENVAT Credit Rules, 2004, and whether penalties were justified.
On examining the records, the Tribunal found that the job worker had availed credit based on invoices that, although issued in the manufacturer’s name, clearly mentioned the job worker as the consignee. The invoices contained the job worker’s name and address, and the goods were delivered directly to its premises. In the case of imported goods, the Bill of Entry also indicated delivery to the job worker under the manufacturer’s instructions. It was also undisputed that the manufacturer had not availed any credit on these capital goods.
The Tribunal referred to the relevant provisions of Rule 9, which permit availment of credit based on specified documents, provided essential details such as duty paid, description, and receipt of goods are established. It noted that the primary conditions for availing credit on capital goods—classification, duty payment, receipt in the factory, and proper documentation—were satisfied in this case.
Further, reliance was placed on a CBEC Circular which clarified that when inputs or capital goods are supplied to a job worker under the manufacturer’s instructions, and the job worker is shown as the consignee, the invoice can serve as a valid document for availing credit. Judicial precedent was also cited to support the position that a job worker is entitled to credit if the goods are received, used in manufacturing, and cleared on payment of duty.
Based on these findings, the Tribunal held that the Revenue’s allegation of wrongful availment of CENVAT credit was not sustainable and lacked statutory support. Consequently, the demand for recovery of credit was set aside. Since the demand itself failed, the penalties imposed on both parties were also held to be without merit and were accordingly quashed.
The Tribunal allowed all the appeals and set aside the impugned orders, granting consequential benefits as per law.
FULL TEXT OF THE CESTAT CHENNAI ORDER
These Appeals though filed by different entities, arising out of two impugned orders, but since the issue involved in these Appeals is common, hence, they are heard together and taken up for common disposal.
2. Heard Shri Raghavan Ramabadran, ld. Advocate for the Appellants and Shri M. Selvakumar, ld. Assistant Commissioner for the Revenue-Commissioner.
3. Brief and undisputed facts that emerge from the impugned orders are that M/s.Glaxo SmithKline Consumer Healthcare Ltd. – Appellant in Appeal No.E/41350/2017 [Glaxo, for short] has entered into an Agreement with M/s.Avlon Cosmetics Private Ltd. (Appellant in Appeal Nos.E/41351/2017 & E/41699/2019) [ACPL, for short] in terms of which, ACPL would receive Horlicks and Boost in various quantities, to be packed into pouches of 18 gms. and 15 gms. Revenue appears to have found during the course of Audit in respect of ACPL that the finished goods were exclusively cleared / sold back to Glaxo under payment of duty on abated MRP value, ACPL did not undertake any other job work, they received conversion charges from Glaxco in terms of the Agreement for the job work done, in terms of the same Agreement, Glaxo was to provide ACPL with capital assets, install the same in the ACPL premises for use in the manufacture of end-products. It thus appeared to the Revenue-Audit party that Glaxo had purchased the required plant and machinery which was capitalized in their books of accounts, which were installed in the premises of ACPL thereby enabling ACPL to avail cenvat credit.
4. It is also an undisputed fact on record that Glaxco had been purchasing the finished goods from ACPL on payment of duty and, insofar as the capital goods like plant and machinery was concerned, it was noticed by the Audit team that ACPL had availed cenvat credit of duty paid on such capital goods though the documents like invoices revealed that the they were raised in favour of Glaxco while the consignment was delivered at the premises of ACPL. This appeared to the Revenue that ACPL had wrongly availed credit on the capital goods which were purchased by Glaxco based on ineligible documents since the invoice was not issued to ACPL and also since ACPL never paid for the said goods and nor were the goods owned by ACPL. This prompted the Revenue to assume that the said availment of cenvat credit was wrong, to be recovered since ACPL had contravened provisions of Rule 9 (1), Rules 3, 3 (5), 3 (5A) and 4 (4) of Cenvat Credit Rules, 2004, apart from Rule 10 ibid. The above resulted in the issuance of a show cause notice dt. 19.01.2016 inter alia proposing to recover wrongly availed cenvat credit including credit availed on Basic Customs Duty (BCD) along with applicable interest and penalties.
5. It appears that the other Appellant-Glaxco was also served the same notice as a co-noticee thereby proposing impose penalty under Rule 15A of CCR. The above SCN for the period April 2012 to May 2014 apparently was issued by invoking the extended period of limitation and the reason in the SCN is that the Appellant did not inform the Department the fact of availing ineligible capital goods credit which was also, according to the Revenue, not explicitly shown in their R.R.1 returns, which came to the knowledge of the Department only at the time of a detailed verification of their accounts.
6. Both the Appellants appear to have filed their explanations/replies to the above SCN which were considered during adjudication by the Commissioner of Customs, Central Excise & Service Tax (Audit), Coimbatore and after affording an opportunity of being heard, vide impugned Order-in-Original No.03/2017-Commr. Audit Cbe. dt. 15.03.2017, the Commissioner confirmed the proposals made in the SCN against both the Appellants and hence, the Appeal Nos. E/41350/2017 (by Glaxco) & E/41351/2017 (by ACPL) before us. A Statement of Demand dt. 16.03.2018 in respect of the very same SCN was issued to both Glaxco and ACPL for the period April 2016 to June 2017 which was adjudicated vide Order-in-Original No.02/2019-DC dated 26.02.2019 which was upheld vide Order-in-Appeal Nos.118 & 119/2019 by Commissioner (Appeals). Aggrieved by the order of First Appellate Authority, M/s.ACPL has filed Appeal No.E/41699/2019 against Order-in-Appeal No.118/2019 dt. 17.07.2019 before the Tribunal.
7. We have carefully perused the impugned orders and also the documents, case law and statutory provisions referred to and relied upon during the course of arguments before us and after going through the same, we find that the following issues arise for our consideration :
(i) whether the extended period of limitation was rightly invoked by the Commissioner ?
(ii) whether there was an violation to Rule 9 of CCR as held in the impugned order and
(iii) whether the imposition of penalties under Section 11AC and Rule 15 A is justified ?
8. We find that the crux of the Revenue’s case is that the Appellant viz. ACPL had availed cenvat credit based on ineligible documents and in this regard it appears that the Revenue entertained a doubt that the invoice contemplated in rule 9 ibid is issued only to a buyer . Rule 9 reads as under :
“RULE 9. Documents and accounts – (1) The CENVAT credit shall be taken by the manufacturer or the provider of output service or input service distributor, as the case may be, on the basis of any of the following documents, namely :-
…. ….
(2) No CENVAT credit under sub-rule (1) shall be taken unless all the particulars as prescribed under the Central Excise Rules, 2002 or the Service Tax Rules, 1994, as the case may be, are contained in the said document :
Provided that if the said document does not contain all the particulars but contains the details of duty or service tax payable, description of the goods or taxable service, assessable value, Central Excise or Service tax registration number of the person issuing the invoice, as the case may be, name and address of the factory or warehouse or premises of first or second stage dealers or provider of output service, and the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, is satisfied that the goods or services covered by the said document have been received and accounted for in the books of the account of the receiver, he may allow the CENVAT credit.
… …
(5) The manufacturer of final products or the provider of output service shall maintain proper records for the receipt, disposal, consumption and inventory of the input and capital goods in which the relevant information regarding the value, duty paid, CENVAT credit taken and utilized, the person from whom the input or capital goods have been procured is recorded and the burden of proof regarding the admissibility of the CENVAT credit shall lie upon the manufacturer or provider of output service taking such credit.”
9. We find that the essential conditions as per CCR for availment of cenvat credit on the capital goods by a manufacturer are essentially that such capital goods are classifiable under the specific Chapter Heading of CETA; in terms of Rule 2 (a) of the CCR, such capital goods received are duty paid, such capital goods are received in the factory on or after 10.09.2004, cenvat credit is availed on the basis of document mentioned in Rule 9 ibid. It is an undisputed fact that the Appellant-ACPL has availed the credit on the basis of invoices though not issued to them but, however, a perusal of same which is part of the Appeal Memorandum reveals that ACPL’s name and address do figure in the invoices and, ACPL has been mentioned as ‘consignee’ in all the excise invoices. Even the shipping address also mentioned the address of ACPL and in respect of the imported goods the endorsement on the Bill of Entry also clearly reveals that the said machines were to be delivered at the premises of ACPL under the instructions of Glaxco. It is also an undisputed fact on record that Glaxco had not availed any cenvat credit in respect of the goods in question. The reliance placed by the Appellant on CBEC’s Circular No.146/57/95-CX. dt. 12.09.1995 throws light in this regard, wherein the Board has clearly issued instructions that where inputs are supplied to a job worker’s premises under the instruction of the manufacturer, the consignee is the job worker and the invoice reveals the consignee’s name and address along with the name and address of the manufacturer under whose instructions the goods have been despatched, the duplicate copy of the invoice under Rule 52A of the erstwhile Modvat regime would serve as a cover for transport and for availment of Modvat by the job worker. In this regard, we find that the Hon’ble Allahabad High Court in the case of Uni Cast Pvt. Ltd. CCE Meerut [2016 (331) ELT 369 (All.) has clearly held that a job worker is entitled to avail credit on the basis of invoices endorsed by the principal as long as the goods are received, utilized in the manufacturing process and cleared upon payment of duty.
10. We also find that the above view has been reiterated in the decisions / orders relied upon by the Appellants.
11. In view of the above discussions, we are of the view that the allegation of the Revenue that ACPL had availed ineligible cenvat credit is clearly unsustainable and is also not supported by any statutory provision and hence, the demand in the impugned orders cannot sustain. For these very same reasons, penalties imposed on both the Appellants lack merit and hence, same are also liable to be set aside.
12. In the result, we set aside the impugned orders and allow the Appeals with consequential benefits, if any, as per law.
(Order pronounced in open court on 30.03.2026)
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