By TIOL News Service

NEW DELHI, NOV 23, 2017: THE appellant is engaged in the manufacture of aluminum ingots, on job work basis, for M/s. Superlink Poly Fab Ltd. (SPFL).

M/s. SPFL is located in Himachal Pradesh and was enjoying the benefit of notification No. 49/2003-CE as also 50/2003-CE. M/s. SPFL sent the imported aluminum scrap to the appellant for conversion of the same into aluminum ingots under the cover of challan issued by them. However, no provisions of law or any notification, procedure was followed. The present appellant, after manufacturing the aluminum ingots, sent the same back to the principal manufacturer without payment of duty.

As the principal manufacturer was enjoying the area based exemption notification, Revenue was of the opinion that the job worker could not have sent the aluminum ingots to the principal manufacturer without payment of duty as the final product of the principal manufacturer was exempted.

Accordingly, proceedings were initiated resulting in confirmation of demand of duty of Rs.2.27 crores approximately.

In the first round of proceedings, the Tribunal remanded the matter for consideration of the claim of the appellant for benefit of credit of duty paid on aluminum scrap.

In denovo proceedings, the Commissioner confirmed the demand of Rs.2.27 crores approximately and denied the Cenvat credit of around 1.45 crores on the ground that the appellants have not been able to produce the legible documents for the purpose of extending the benefit of credit. It was also observed that either the photocopies of the Bills of Entry stand produced which are also not very legible or the customs paid challans are produced which are not the documents for the purpose of explaining the benefit of Cenvat credit.

The Bench observed -

+ It appears that the appellant has manufactured aluminum ingots on job work basis for M/s. Superlink Poly Fab Ltd., which is situated in Himachal Pradesh and is enjoying the benefit of area based exemption under Notification No. 49/2003. The goods apparently have been cleared from the appellants premises back to M/s. Superlink Poly Fab Ltd. without payment of duty.

+ Since the principal manufacturer, after receipt of goods from the appellant did not clear his final products on payment of duty, the benefit of job work notification No. 214/86-CE will not be available to the appellant. Consequently, he is required to pay duty on such clearance made to M/s. Superlink Poly Fab Ltd. Accordingly, the duty demand amounting to Rs. 2.27 crores made in confirmation by the adjudicating authority merits to be upheld.

In the matter of admissibility of CENVAT credit, the CESTAT further noted -

"…we are inclined to disallow the cenvat credit for the different legal reason. The disputed Bill of Entry are pertaining to the import of scrap made by M/s. Superlink Poly Fab for use in their factory which is covered by area based exemption. As such, these inputs for the principal manufacturer would not be eligible for cenvat credit in his hand because he is not paying any duty on the finished products. As per the normal procedure when duty paid raw materials are cleared outside as such, the invoice is issued and cenvat credit availed on such raw materials is debited and the recipient of such material is entitled to avail cenvat credit on the basis of invoice issued. In the present case, no such document has been issued by the principal manufacturer. As such, the duty paid scrap which are inputs for the principal manufacturer, when transferred to the appellant, subsequently, the appellant will not be entitled to cenvat credit for excise duty paid on suchscrap, since these goods have not been imported by the appellant themselves."

The Tribunal also concurred with the valuation adopted by the adjudicating authority as being duly justified in paragraph 17 of his order.

The impugned order was upheld and the appeals were dismissed.