Manufacturer pays Excise Duty on Finished Product, CCR on Intermediate Products not Sustainable: CESTAT allows Appeal [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai Bench, allowed an appeal and held that the manufacturer paid excise duty on finished products so the application of CenvatCredit Rules (CCR) on intermediate products is not sustainable.

The appellant, M/s Venkatesawara Steel & Springs (India) Pvt. Ltd., was paying service tax under reverse charge mechanism for Goods Transport Agency (GTA) services but did not pay the service tax on the job work charges despite collecting job charges. It was also found that the Appellant was availing CENVAT credit of tax paid on various taxable services (GTA, Consultancy, etc.).

A show cause notice was issued on 19.10.2015 demanding 5% of the value of exempted services for the period 2010-12 and 6% from 2012-13 onwards as required to be made under Rule 6 (3) of the CCR apart from imposing penalty under Section 78 of the Finance Act, 1994 read with Rule 15 (3) of CCR 2004 along with applicable interest under Section 75 read with Rule 14. The First Appellate Authority upheld the demand and so the appellant filed an appeal before CESTAT.

The appellant argued that their principal manufacturer who sent the goods have been paying Excise duty on their finished products.

The processes undertaken by the appellant ultimately resulted in the conversion of steel wire into identifiable spring components which are returned to the manufacturer under delivery challan. Thus, it was contended that such job work clearances could never be treated as ‘exempted goods’ when duty is paid by the manufacturer.

The bench of P. Dinesha (Judicial Member) referenced Sagittarius Metals Private Ltd. v. CCE & ST Bangalore (2022) and held that credit would be allowed as long as the duty is paid on the final product. The order was accordingly set aside and the appeal was allowed with consequential benefits.

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