CESTAT Chennai Holds Job Worker Eligible for CENVAT Credit on Capital Goods Despite Invoice Name Mismatch

CESTAT Chennai Holds Job Worker Eligible for CENVAT Credit on Capital Goods Despite Invoice Name Mismatch

Introduction

The Chennai Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that a job worker is entitled to avail CENVAT credit on capital goods even where the invoices are not issued in its own name, so long as the goods are received, properly accounted for, and used in the manufacturing process. The Tribunal emphasized that substantive compliance under the CENVAT Credit Rules prevails over mere invoice name discrepancies.

Factual Background

The dispute arose out of a job work arrangement between GlaxoSmithKline Consumer Healthcare Ltd. and Avlon Cosmetics Pvt. Ltd. (ACPL). Under this arrangement, ACPL undertook the job of packing products such as Horlicks and Boost.

For carrying out the manufacturing and packing operations, GlaxoSmithKline Consumer Healthcare Ltd. supplied capital goods, which were installed at ACPL’s manufacturing premises. During departmental audit, the Revenue objected to the CENVAT credit availed by ACPL on the ground that the invoices for the capital goods were issued in the name of Glaxo and not ACPL. It was further alleged that ACPL neither owned nor directly paid for the goods and was therefore ineligible under the CENVAT Credit Rules, 2004.

Based on this objection, the department confirmed recovery of the credit along with interest and penalties against both entities.

Procedural Background

Aggrieved by the adjudication orders, the appellants approached the CESTAT Chennai Bench. The matter was heard by Judicial Member P. Dinesha and Technical Member Vasa Seshagiri Rao.

The principal issue before the Tribunal was whether a job worker can avail CENVAT credit on capital goods when the invoice stands in the principal manufacturer’s name but the goods are physically received and used at the job worker’s premises.

Issues

1. Whether a job worker can claim CENVAT credit on capital goods where invoices are not issued in its own name.

2. Whether receipt, accounting, and actual use of capital goods at the job worker’s premises is sufficient compliance under the CENVAT Credit Rules, 2004.

3. Whether the demand of credit, interest, and penalties was legally sustainable.

Contentions of Parties

The Revenue contended that since the invoices for the capital goods were issued in the name of GlaxoSmithKline Consumer Healthcare Ltd., ACPL had no legal entitlement to avail the credit. It was argued that ACPL neither held title over the goods nor had it directly borne the purchase cost, thereby violating the documentary requirements under Rule 9 of the CENVAT Credit Rules.

The appellants, on the other hand, submitted that ACPL was clearly reflected as the consignee, the goods were physically delivered to and installed at its premises, and the same were exclusively used in the manufacturing process undertaken on job work basis. It was further pointed out that Glaxo itself had not availed any credit on those capital goods.

Reasoning and Analysis

The Tribunal examined the documentary records and found that ACPL was specifically mentioned as the consignee in the invoices, and there was no dispute that the capital goods had in fact been received, accounted for, and used at its premises in the course of manufacturing.

The Bench relied on CBEC Circulars and settled judicial precedents recognizing the entitlement of job workers to avail CENVAT credit where the substantive conditions of receipt and use are fulfilled.

Interpreting Rule 9 of the CENVAT Credit Rules, 2004, the Tribunal held that the Rule primarily requires proof that the goods have been received and duly accounted for, and does not insist that the invoice must necessarily bear the claimant’s name in every case, particularly where the consignee details clearly establish the flow and use of the goods.

The Tribunal further found it significant that GlaxoSmithKline Consumer Healthcare Ltd. had itself not availed any CENVAT credit on the same capital goods, eliminating any risk of double credit. Accordingly, the Bench concluded that the Revenue’s objection was unsupported by any statutory provision and contrary to the substantive scheme of CENVAT credit law.

Decision

The Chennai Bench of CESTAT held that Avlon Cosmetics Pvt. Ltd., as a job worker, was validly entitled to avail CENVAT credit on the capital goods despite the invoice name mismatch, since the goods were received, accounted for, and actually used in manufacturing. The Tribunal therefore set aside the impugned orders and allowed the appeals with consequential benefits.