MUMBAI, APRIL 12, 2013: ALTHOUGH the Larger Bench of the Tribunal in the case of Sterlite Industries [2005-TIOL-305-CESTAT-MUM-LB] has held that MODVAT credit of duty paid on the inputs used by the job worker in the manufacture of final product cleared without payment of duty in terms of notification 214/86-CE for further utilisation by the supplier in the manufacture of final product, which are cleared on payment of duty by the principal manufacturer, would not be hit by provision of Rule 57C of CER, the Revenue formations choose to look the other way.

In fact, the CESTAT, WZB itself had in the case of Tata Motors [2009-TIOL-1427-CESTAT-MUM] chose to shun this Larger Bench decision and ordered the appellant to make a pre-deposit of almost Rs.40 lakhs.

The appellant filed a Writ Petition against this order and the Bombay High Court while setting aside the order observed [2009-TIOL-665-HC-MUM-CX]-

"6. We are at pains to understand the approach of the learned Tribunal. Judgments of higher Courts considering judicial discipline have to be followed by the Courts subordinate to the higher court. Failure to do so would result in judicial mayhem. Subordinate courts are bound to follow the judgments unless there be a subsequent judgment of a Higher Court which has taken a view different from the view earlier expressed…"

Nothing seems to have changed as far as the department is concerned. They anyways, are never concerned .

In the present case the appellants were following rule 4(5)(a) of the CCR, 2004 for their job work activity of processing Copper Wire and Kraft paper. On the inputs which were used in job work, the appellant was availing CENVAT credit.

The same old allegation followed -that the appellant is a job worker and not paying duty at the time of clearance of the job worked goods by availing exemption under notification 214/86-CE and, therefore, they are not entitled for input credit on the inputs used in job work activity.

Both the lower authorities confirmed the demand -the year being 2012 and the appellant is now before the CESTAT.

The appellant remained absent for the hearing.

The Revenue representative submitted that the appellant had failed to show as to whether the principal manufacturer has discharged the duty liability on the finished goods which were produced after carrying out certain processes on the job worked goods received from the appellant.

The Bench observed -

"6. On perusal of the reply to the show-cause notice, I find that it has been clearly stated by the appellant that once the processed goods were cleared by the appellant to the manufacturer after following the procedure under Rule 4(5)(a) of CENVAT Credit Rules, 2004, the principal manufacturer carried out certain process on the job work goods and the same were cleared on payment of duty. This fact has not been controverted by the Revenue in the impugned orders. No enquiry has been made to principal manufacturer whether principal manufacturer has discharged the duty liability or not. Therefore, the impugned order is not sustainable and the same is set aside and the matter is remanded back to the adjudicating authority to ascertain the fact whether the principal manufacturer has discharged the duty liability or not? If principal manufacturer has discharged the duty liability then the appellant is entitled for CENVAT credit."

And so, the order was set aside and the matter was remanded to the adjudicating authority with directions to ascertain the factual position.  

(See2013-TIOL-592-CESTAT-MUM)