By TIOL News Service

NEW DELHI, MAY 23, 2014: THE units are located in the area of Jammu & Kashmir and are availing Area Based   Notification No. 56/2002-CE   dated 14.11.2002. The factory premises of   M/s Alu Bond Enterprises   were visited by the officers, who conducted various checks and verifications and found shortage of certain raw materials. The shortage in the main raw materials aluminium coils was to the extent of 22.803 MT. The appellants explained that they have sent 21.5 MT of aluminium coils to their sister unit   M/s Alstrong Enterprises   for conversion on job work basis. The shortages of the other raw materials etc. were found to be much on the lower side.

By observing that the appellants did not follow the procedure as per the provisions of Rule 4(5) of CCR, 2004 for sending the cenvatable raw material to the job worker for conversion the lower authorities held that the shortage of the raw material is established and the appellant is liable to reverse the credit. Confiscation was also ordered along with imposition of penalties.

Accordingly, the goods sent back by M/s Alstrong Enterprises after conversion were put to seizure along with confirmation of demand and imposition of penalties.

The Bench observed that both the units are located in area of Jammu & Kashmir and enjoying the exemption Notification No. 56/2002-CE and in terms of which an assessee is entitled to avail the CENVAT credit of duty paid on the inputs; that this credit is required to be first exhausted for payment of duty on the final product and thereafter the balance duty on the final product is to be paid out of the PLA and which duty is subsequently refunded to the manufacturer;that the entire situation is Revenue neutral and no assessee would get benefitted by indulging into clandestine activity.

It was also mentioned -

"5. …, I find that if the Revenue is directing an assessee to reverse the CENVAT credit, he will have to pay more duty on its final product, out of the PLA and would be entitled to more refund. As such the stand taken by the Revenue is in fact favouring the assessee."

Holding that mere non-following of the procedurewould not result in denial of credit and that the shortages in respect of the other raw materials are marginal, the CESTAT set aside the orders and allowed the appeals.

(See 2014-TIOL-843-CESTAT-DEL)