By TIOL News Service

MUMBAI, FEB 14, 2014: THIS is a Revenue appeal.

Brief facts are that the respondents are manufacturers of C.I. Castings. As the respondents were not having the facilities for machining, grinding etc. to manufacture the auto components from C.I. Castings they procured tools and tips as per the requirement of the job workers and the same were sent to the job-worker for further processing. These tools and tips were received back within 180 days by the respondent but not "as such" and they took credit on the same. The Revenue was of the view that the respondent is not entitled to take CENVAT credit on these tools and tips as the same have not been received "as such".

A show-cause notice was issued. The order passed confirming the demand was set aside by the Commissioner(A). And so, the Revenue is in appeal.

The Revenue representative submitted that the "tools and tips" are not capital goods as they have not been used in the factory of the respondent and these tools and tips were not received in their factory "as such" after job-work, therefore, the respondents are not entitled to take credit of the same. That the respondents have taken the credit on these tools and tips as capital goods - 50% in the year of procuring and remaining 50% in subsequent year when they were not in their possession. Inasmuch as since the respondents are not entitled for credit, the order of Commissioner (A) should be set aside.

The respondent assessee supported the order of the lower appellate authority.

The Bench observed -

"6. In the show-cause notice (itself) these tools and tips has been held as 'capital gods'. Therefore, the revenue cannot be said, at this stage, that these tools and tips are not capital goods. As these tools and tips are capital goods and there is no bar under the Central Excise Acts or Rules that the capital goods cannot be sent to the job-worker. Therefore, the capital goods used in the factory of the job-worker are entitled for credit to the respondent. Although the capital goods could not be returned "as such" after the usage, in that circumstances also the credit cannot be denied. Further, there is no bar on the respondent to take away 50% of the CENVAT credit in the year of procurement of the capital goods and the remaining 50% in the subsequent year although they were in the possession of the job-workers. There is no bar in taking 50% of the CENVAT credit in the subsequent year as they are components of the capital goods and are covered under Rule 4(2)(b) of CENVAT Credit Rules, 2004. In these circumstances, I do not find any infirmity in the impugned order and the same is upheld."

In fine, the Revenue appeals were dismissed.

(See 2014-TIOL-228-CESTAT-MUM)