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Credit availed on inputs cleared to job worker and credit also availed on processed goods returned by job worker on payment of duty - No double benefit: High Court

By TIOL News Service

 

CHENNAI, SEPT 21, 2015: THE respondents availed credit on inputs, namely, 'plastic components' and cleared them to their job worker for painting, under challans in terms of Notification No.214/86 dated 25.03.1986. The job worker returned the inputs after painting, on payment of duty under invoices, instead of returning the goods under a challan specified under the notification. The appellants took credit on the 'plastic components' cleared by them as well as on the processed inputs, which was objected to by the department on the ground that credit had been availed twice. The assessee got a favourable order in Tribunal. So, revenue is in appeal before the High Court.

After hearing both sides, the High Court held:

What happened in this case was that the first respondent/assessee handed over plastic materials during the period from July 2006 to December 2006 to a Company by name Nypro Forbes Products Private Limited for carrying out certain job works. The goods were handed over after availing credit for inputs, but, not actually paying duty. The Company which undertook the job work, while returning the goods, after carrying out the job work, raised invoices, for amounts including the duty that they paid. Even according to the Department, the job worker was not liable to make payment of duty. But, since the duty was paid by the job worker and also claimed from the first respondent/assessee, the first respondent/assessee claimed credit.

But, the Department went on a wrong presumption that credit had been claimed twice by the first respondent. As a matter of fact, the assessee did not claim credit twice over. At the time when the goods were supplied, they availed the credit. After the Company which undertook the job work, had paid the duty, even according to the Department, the job worker was not liable to pay it. The original authority and the appellate authority wrongly construed the same as a double benefit by applying the theory of unjust enrichment. This is what was rectified by the Tribunal. Hence, the order of the Tribunal is in accordance with law. Therefore, the question of law is answered in favour of the assessee.

(See 2015-TIOL-2192-HC-MAD-CX)

 


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