Central Excise Appeal No. 202 of 2010 -1- **** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Central Excise Appeal No. 202 of 2010 Date of decision: 7.2.2011 Commissioner of Central Excise, Commissionerate, Ludhiana ...Appellant Versus M/s Jainsons Wool Coombers Ltd. ...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Mr. Kamal Sehgal, Advocate for the appellant. **** ADARSH KUMAR GOEL, J. 1. This appeal has been preferred by the revenue under Section 35G of the Central Excise Act, 1944 against order dated 30.12.2009 passed by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi (for short 'the Tribunal') claiming following substantial questions of law:- “i) Whether the provisions of Rule 6 of the Cenvat Credit Rules, 2001 & 2002 does not debar a unit from taking credit of duty on the quantity of inputs used in the manufacture of job worked goods cleared without payment of duty? ii) Whether the ld. CESTAT is correct in allowing the Central Excise Appeal No. 202 of 2010 -2- **** Cenvat Credit by placing reliance on the decision of the ld. CESTAT in the case of Sterlite Industries (I) Ltd. V. C.C.E. Pune [2005 (183) ELT353 (Tri.-L.B.)] without taking into cognizance the provisions of Rules 2(d), 2(f), 3 and 4(5) (a) of Cenvat Credit Rules, 2001 & Rule 2(e), 2 (g), 3 & 4 (5)(a) of Cenvat Credit Rules, 2002? 2. The assessee is manufacturer of wool tops and woolen yarn falling under Chapter 51 of the Schedule to the Central Excise Tariff Act, 1985 and is availing cenvat credit under the Cenvat Credit Rules, 2002. Along with its own manufacturing it also does job work for other manufacturers. It availed cenvat credit on inputs i.e. lubricants , soaps, chemical etc. utilized in manufacture of their own goods as well as processing of goods on job work. Show cause notice was issued to the assessee proposing recovery of amount claimed by the assessee as cenvat credit on the ground that cenvat credit granted on the inputs amounted to availing of such credit on duty free goods. The demand was dropped by the Adjudicating Authority vide order-in-original dated 14.2.2006. It was observed that there was an amendment to Rules from 1.4.2003 allowing benefit of cenvat credit on inputs used by the job workers. It was further observed as under:- “As per said circular in para A(h), Processors who undertake job work and also do processing on their own and obtain dye and chemicals can take credit of duty paid on such dyes and chemicals even if some of these inputs were used in making goods cleared without payment of Central Excise Appeal No. 202 of 2010 -3- **** duty under the job work scheme. In the light of these changes in the Cenvat Credit Rules, the credit of inputs on chemicals etc. taken by the noticee is admissible. As regards, the inputs namely soaps & Lubricants is concerned, it is observed that simplified procedure has been laid down under Rule 12B for job work in Textile & Textile articles. Under the proviso to sub-rule 1 of rule 6 of Cenvat Credit Rules, the cenvat credit on inputs shall not be denied to job worker referred to Rule 12B on the ground that the said inputs were used in the manufacture of goods cleared without payment of duty under Rule 12B. Since the noticee has undertaken the job work process within the provisions of Rule 12B under the new excise procedures on textile & Textile articles, the relaxation in the obligation of manufacture of dutiable & exempted goods provided under the sub-rule 1 of the rule 6 is available to the noticee. In view of the above discussion, I find that the noticee has correctly taken the credit on inputs & the same was admissible.” 3. The above view has been upheld by the Commissioner (Appeals) as well as the Tribunal. The Tribunal followed the judgment of its larger Bench in Sterlite Industries (I) Ltd. Vs. Commissioner of Central Excise, Pune 2005 (183) ELT 353 (Tri.- L.B.). The larger Bench followed the judgment of Hon'ble Supreme Court in Escort Vs. C.C.Ex. [2004 (171) E.L.T. 145 (S.C.)] holding that clearing of goods at intermediate stage was not at par with clearing of final goods without payment of duty and cenvat credit Central Excise Appeal No. 202 of 2010 -4- **** could not be denied on inputs on that ground. Appeal against the judgment in Sterlite was dismissed by Bombay High Court. 4. We have heard learned counsel for the appellant. 5. Learned counsel for the appellant submits that allowing the assessee to avail cenvat credit at intermediate stage will be at par with availing of cenvat credit on exempted goods which was not permissible. 6. We are unable to accept the submission. The Adjudicating Authority, the Commissioner (Appeals) as well as the Tribunal have rightly held that clearing goods at intermediate stage was not at par with clearing of exempted goods. Under the circular of the Board as well as the scheme or the Rules, cenvat credit is permissible to a job worker or even to a manufacturer at intermediate stage in respect of inputs like lubricants, soaps, chemical etc. On final products, duty is admittedly paid. Object of cenvat credit is to avoid cascading effect of duty. We thus do not find any error in the view taken by the Tribunal. No substantial question of law arises. 7. Accordingly, the appeal is dismissed. (Adarsh Kumar Goel) Judge February 07, 2010 (Ajay Kumar Mittal) Pka Judge