CENVAT credit on moulds remains admissible when they are sent to job workers and returned under challans.

Exide manufactured automobile batteries and availed CENVAT credit on inputs and capital goods, including moulds used to manufacture battery containers and lids.

It sold PP granules to vendors after reversing the credit, but sent moulds to them under job-work challans. The vendors returned the finished containers and lids on payment of excise duty, which Exide claimed as credit.

The Department alleged that the moulds had been sent to independent manufacturers rather than job-workers, contrary to Rules 2(a)(A) and 4(5)(b) of the CENVAT Credit Rules, 2004, and that Exide had obtained double credit. A show-cause notice sought recovery of ₹47,09,359, with interest and penalty. The adjudicating authority confirmed the demand, and the Commissioner (Appeals) upheld it. Exide appealed to the Tribunal.

1. Whether Exide was entitled to retain CENVAT credit on moulds sent to vendors under job-work challans, or whether the arrangement contravened the CENVAT Credit Rules, 2004.

2. Whether the credit arrangement resulted in double CENVAT credit to Exide.

3. Whether the extended period of limitation could be invoked where the relevant transactions were within the Department’s knowledge and the arrangement was revenue-neutral.

Rule 2(a)(A) of the CENVAT Credit Rules, 2004 governs the treatment of capital goods, while Rule 4(5)(b) provides for sending goods, including moulds, to a job-worker subject to the prescribed procedure.

Rule 3(5) concerns reversal of credit when inputs are removed as such; the Tribunal distinguished Exide’s sale of PP granules, for which it reversed credit, from its transfer of moulds under job-work challans.

The Tribunal treated revenue neutrality as relevant to both the alleged credit irregularity and the extended limitation period, relying on Commissioner of C. Ex., Aurangabad v. Somaiya Organo Chem, which held that where reversal would enable the job-worker to take credit and use it to pay duty, the exercise is revenue-neutral.

It also considered a prior Commissioner (Appeals) order concerning Exide’s other unit on the same issue, which had attained finality because the Department did not appeal.

The Tribunal accepted that Exide sold PP granules after reversing credit but sent the moulds under job-work challans, and that the moulds were returned to Exide through the job-work arrangement.

It considered the choice to account for granules through sale and credit reversal, while tracking the capital moulds through job-work records, to be a matter of the manufacturer’s practical accounting; the moulds remained Exide’s capital goods and the Tribunal found no breach of the CENVAT Credit Rules in the procedure adopted.

It rejected the double-credit allegation because reversal of credit on the moulds would have allowed the job-worker to take corresponding credit, leaving the transaction revenue-neutral.

On limitation, it found that the relevant facts—including the credit on granules, its reversal, and the moulds’ removal under job-work challans—were within the knowledge of the Range and Divisional officials; suppression with intent to evade duty was therefore not established.

It also held that the extended-period demand was unsustainable because suppression was not established and the transaction was revenue-neutral.

The appeal was allowed, with consequential relief, if any, as per law; the cross-objection was disposed of in those terms.