[2014] 51 taxmann.com 8 (Allahabad) Commissioner of Central Excise, Noida vs. Samsung India Electronic Ltd

Facts:
Samsung Electronics India Information and Telecommunication Ltd. (SEIITL) is manufacturing CTV chassis for the appellant on job work basis. SEIITL was amalgamated with the appellant with effect from 01- 04-2003. Prior to amalgamation, SEIITL took CENVAT Credit of duty paid on certain capital goods received from assessee and used exclusively for the purpose of manufacture of CTV chassis (exempted goods) supplied to the appellant. The said CTV chassis are used by the appellant for manufacturing of dutiable final product, i.e., Colour TV. The department denied CENVAT Credit of capital goods by invoking Rule 6(4) of the CENVAT Credit Rules, 2004 (CCR) as the capital goods were used exclusively in manufacturing exempted product. The Tribunal decided the matter in favour of appellant, aggrieved by which, the department preferred this appeal.

Held:
The High Court observed that Rule 3 of CCR allows the credit on capital goods received in the factory and used in the manufacture of intermediate products by a job worker. Further Rule 6(4) denies the CENVAT Credit only if capital goods are exclusively used in the manufacture of final products exempted from the whole of the duty of excise leviable thereon. In the appellant’s case, chassis manufactured by the job worker was an intermediary product which in turn would be used by the assesse in manufacturing TV, a dutiable product. The High Court referred to CBEC Circular No. 665/56/2002-CX dated 25-09-2002 which allows credit of capital goods to manufacturer in such cases. The Hon’ble High Court held that object of the CENVAT Credit is to avoid cascading effect of duty. Based on the circular and also relying upon various judicial pronouncements on the subject matter including the Apex Court’s decision in the case of 2004 taxmann.com 1332 (SC) Escorts Ltd. vs. CCE, the department’s appeal was dismissed.