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Demosha Chemicals Pvt. Ltd. v. C.C.E. & S. Tax, Daman - (Customs, Excise and Service Tax Appellate Tribunal) (29 Jun 2017)

Capital goods removed from factory should be received back within 180 days and if not received, Appellant is required to reverse the credit availed on such capital goods



In facts of present case are that, Appellants had availed CENVAT credit on capital goods and transferred same to their sister unit adjacent to their factory premises for job work premises. Both units were having separate Central Excise Registration. Alleging that, credit availed on said capital goods to tune of Rs. 3,77,798/- is recoverable a show cause notice was issued to Appellant. On adjudication, demand was confirmed with interest and equal amount of penalty. On appeal, Commissioner (Appeals) upheld order of adjudicating authority and rejected their appeal. Hence, present appeal. Question that needs to be answered is whether CENVAT credit availed on capital goods sent to their sister unit for job work and not received back within 180 days from date of removal is recoverable or otherwise.

Rule 4(5)(a) of CENVAT Credit Rules, 2004 provides that, CENVAT credit on inputs shall be allowed even if any inputs as such or after being partially processed are sent to a job worker and from there subsequently sent to another job worker and likewise, for further processing, testing, repairing, re-conditioning or for manufacture of intermediate goods necessary for manufacture of final products or any other purpose, and it is established from records, challans or memos or any other document produced by manufacturer or the provider of output service taking CENVAT credit that, inputs or products produced therefrom are received back by manufacturer or provider of output service, as case may be, within one hundred and eighty days of their being sent from factory or premises of provider of output service, as case may be, provided that, credit shall also be allowed, even if any inputs are directly sent to a job worker without their being first brought to premises of manufacturer or provider of output service, as case may be, and in such a case, period of one hundred and eighty days shall be counted from date of receipt of the inputs by the job worker.

Rule 4(5)(a) makes it crystal clear that, capital goods removed from Appellant's factory should be received back within 180 days and if not received, Appellant is required to reverse credit availed on such capital goods. Said Rule also provides to take re-credit on capital goods, when received after 180 days from initial date of removal. In present case, even though capital goods were cleared earlier but no evidence has been adduced by Appellant that, same were received within 180 days or thereafter. In these circumstances, confirmation of demand is sustainable.

However, penalty under Rule 15(2) of CENVAT Credit Rules, 2004 read with Section 11AC of CEA, 1944 cannot be sustained in view of judgment of Gujarat High Court in Patel Alloys Steel Pvt. Ltd.'s case. Impugned order is set aside to extent of imposition of penalty and appeal is partly allowed to said extent.

Relevant : Patel Alloys Steel Pvt. Ltd. vs. C.C.E., Ahmedabad 2013 (04 LCX 0053


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