Mishra Dhatu Nigam Ltd vs Commissioner Of Central Tax Hyderabad - GST

Anil Choudhary, Member (J)

Heard the parties.

The issue involved in this Appeal is whether the appellant/assessee was required to reverse Cenvat credit in terms of Rule 4(5)(a) of CCR, 2004.

The appellant is a PSU under the Ministry of Defence and are engaged in the manufacture of super alloys falling under Chapter 72 of CETA. They are registered with the Central Excise department. The appellant procures Cenvatable inputs and input services and takes credit as per CCR. Pursuant to audit, it appeared to Revenue that during the period 2012-13 to 2013-14, the appellant has not received back goods sent to the job worker within the stipulated period of 180 days in terms of Rule 4(5)(a) of CCR. Accordingly, it appeared with respect to 8 job work challans, during the financial year 2012-13 and 14 challans, during the financial year 2013-14, the goods sent for job work have not been received or received late (after 180 days) totalling Rs.5,92,22,981/- on which Cenvat credit reversible was calculated @ 12.36% or Rs.74,06,480/- as per the audit note raised vide report dt.16.07.2014.

The appellant filed a reply dt.20.05.2015 bringing to notice that they have received all the goods sent for job work, though there is a delay of some days in case of some job work challans. As the appellants had till 20.05.2015, not received back the goods sent on job work in respect of 4 challans Nos. 78, 80, 81 & 82, they reversed the amount of Rs.19,14,774/- vide challans, under intimation dt.18.05.2015 given to Revenue. Accordingly, after delay of more than two years from filing of the reply by the appellant, SCN dt.12.10.2017 was issued invoking extended period of limitation, demanding reversal of Cenvat credit of Rs.74,06,480/- with further proposal to demand interest and penalty. Appropriation of Rs.19,14,774/- was also proposed.

The SCN was adjudicated on contest and the proposed demand was confirmed along with interest and penalty. In the first round, the Commissioner (Appeals) had remanded the matter for verification of facts as the appellants had contended that with respect to some of the inputs, they had not taken credit in their books as such inputs are used for manufacture of exempted goods. It was also the case of the appellant that the SCN has been raised without proper verification and wherein, with respect to proposed amount for recovery of Rs.23,94,330/-, the goods had already been received back within the stipulated period of 180 days. Thus, the balance of Rs.30,97,376/-, where the appellant had contended that though the goods have been received beyond 180 days, they have not taken Cenvat credit on the inputs being attributable to production of exempt goods and hence, provisions of Rule 4(5)(a) are not attracted. Pursuant to remand, in the denovo adjudication order, the Adjudicating Authority has confirmed the demand of Rs.30,97,376/- along with penalty @ 50% under Rule 15 of CCR with interest.

Being aggrieved, the appellants had preferred appeal before the Commissioner (Appeals), who has relied on the findings of the Original Authority that appellant has not furnished necessary documentary evidence to substantiate their claim even in the denovo adjudication proceedings; that no correlation has been established by the appellant between job work challans and the Central Store Receipt Vouchers (CSRV) submitted as proof of procurement of duty free material and that all bills of material/entry submitted by them except one, are only for procurement of duty paid goods. Accordingly, he was pleased to confirm the demand with proportional penalty and also upheld the invocation of extended period of limitation.

Being aggrieved, the appellant is before this Tribunal. Learned Counsel for the appellant explains that the appellant has not sent for job work the raw material received as such or partially processed raw material. In fact, the raw material after receipt is charged in the furnace for primary melting and thereafter, they get electrodes. These electrodes are again put in the furnace for secondary melting and they obtain ingots. Such ingots are again subjected to forging – hitting the metal and pressing, and resultantly they get slabs. It is these slabs (intermediate goods), which the appellant sent for job work for conversion into plates/rings/wires etc., by rolling process. It is further urged that these facts are not disputed.

Learned Counsel further urges that Rule 4(5)(a) of CCR is attracted only when raw material is sent to job work as such or partially processed raw material. In the facts of the present case, admittedly appellant has manufactured finished products/intermediate products being forged slabs from the raw material and in such circumstances, the provisions of Rule 4(5)(a) of CCR, which provides that – if the inputs as such or partially processed goods are sent to job work for further processing or for manufacture of intermediate goods necessary for the manufacture of final goods or any other purpose and it is established from the records, challans and memo produced by the manufacturer taking the Cenvat credit that the goods are received back in the factory within 180 days of there being sent to job work, and if the inputs or the capital goods are not received back within 180 days, the manufacturer shall pay an amount equivalent to the Cenvat credit attributable to the inputs or capital goods by debiting the Cenvat credit or otherwise, but the manufacturer can take Cenvat credit again when the inputs or capital goods are received back in the factory or in the premises of the provider of output service.

Accordingly, learned Counsel prays for allowing their appeal with consequential benefits.

Learned AR for Revenue relies on the impugned order and particularly relies on the findings of the Commissioner (Appeals) to the effect that appellant failed to correlate the duty free raw material with the goods sent for job work.

Having considered the rival contentions, I find that the provisions of Rule 4(5)(a) of CCR are attracted only when raw material or partially processed raw material are sent to the job work or for further processing, etc. But where the manufacturer has manufactured finished goods/intermediate goods, which have been sent for job work, the provisions of Rule 4(5)(a) are not attracted, as in such case, at best, the rate of duty as per Central Excise Tariff will be applicable.

In view of my findings and observations, the provisions of Rule 4(5)(a) are not attracted in the facts and circumstances of the present case. Accordingly, impugned order is set aside and appeal is allowed. Appellant shall be entitled to consequential benefits, in accordance with law. As appeal is allowed on merits, the ground of limitation is left open.

Appeal allowed.