ritu sharma (student) (62 Points)
07 May 2009hi to all.....
As per EN no. 214/86 a job worker is not required to pay excise duty on goods removed by him for sending them back to principal manufacturer. But he is allowed CREDIT of INPUTS purchased for doing the job work.......my question is that when a job worker is not paying any excise duty....then why is he allowed credit on inputs used?? even if allowed how can he use it??
thank u
Rajesh Kumar
(Advocate- Tax)
(7806 Points)
Replied 09 May 2009
Although the job worker is not paying duty, the goods are not exempted and duty is finally paid by the principal manufacturer.
Therefore credit is allowed.
ritu sharma
(student)
(62 Points)
Replied 09 May 2009
yes i agree...but here principal manufacturer is paying the duty...so he must take credit. But here job workr is booking the credit on inputs purchased..so what will be the treatment.
Rajesh Kumar
(Advocate- Tax)
(7806 Points)
Replied 09 May 2009
Nice logic Ritu- I really appreciate it.
But one has to understand the nature of Central Excise duty. Central Excise duty in on "goods". Thus whether credit is eligible or not depends upon the existence of duty on "goods". Thus when there is duty on goods, credit is available.
ritu sharma
(student)
(62 Points)
Replied 10 May 2009
hi...thanks for information.... i appreciate it..but u have not answerd my question??
there must be a proper treatment for this situation....
thank u
Rajesh Kumar
(Advocate- Tax)
(7806 Points)
Replied 10 May 2009
Well I said what the Court said.
The issue was examined by the Larger Bench of the Tribunal in Sterlite Industries (I) Ltd. Vs. CCE, Pune [2005 (183) ELT 353] , wherein the larger bench of the Hon’ble Tribunal held that,
“In only case of Escorts Ltd. v. CC Ex, Delhi [2003 (160) E.L.T. 623 (Tri-Del.)] while interpreting Rule 57C of the Central Excise Rules, the Tribunal rejected the appellants claim of Modvat credit of duty paid on the inputs used in the manufacture of the parts, which were cleared without payment of duty to, appellant's other unit under Chapter X procedure and utilised in the manufacture of tractor which were cleared on payment of duty by observing that since no duty was paid on the part at the time of clearance, Rule 57C will apply and no Modvat credit would be admissible. However, the said decision was subsequently reversed by the Supreme Court as reported in Escort v. C.C.Ex. [2004 (171) E.L.T. 145 (S.C.)]. For appreciation, we reproduce paragraphs 8 & 9 of the said decision.
8. It is to be seen that the whole purpose of the Notification and the Rules is to streamlines the process of payment of duty and to prevent the cascading effect if duty is levied both on the inputs and the finished goods. Rule 57D(2), which has been extracted hereinabove, shows that in the manufacture of a final product an intermediate product may also come into existence. Thus in cases where intermediate product may also come into existence. Thus in cases where intermediate product comes into existence, even though no duty has been chargeable to Nil rate of duty, credit would still be allowed so long as duty is paid on the final product.
9. In cases of manufacturers like the Appellants the final product is the tractor. The intermediate product would be parts which are manufactured for being used in the tractor. In such a case the parts would not be the final product. Thus Rule 57C would have no application. The mere fact that the parts are cleared from one factory of the Appellants to another factory of the Appellants would not disentitle the Appellant from claiming benefit of Notification No. 217/86-C.E., dated 2nd April, 1986. As stated above, the Notification itself clarifies that the inputs can be used within the factory of production or in any other factory of the same manufacturer.”
I hope this will clarify the situation.
ritu sharma
(student)
(62 Points)
Replied 12 May 2009
hello Mr Rajesh. Im really appreciating the effort ur r putting for me.
The whole case that u have posted has transmitted over my head. Im tryin to understand it
thanks a zillion for supporting n pls do keep replying to my further queries.
tc
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