JUDGMENT

Kuldeep Tiwari, J.

The present appeal, filed by the Revenue, has been directed against the judgment dated 5.9.2014 (Annexure A/3) passed by the learned Customs, Excise & Service Tax Appellate Tribunal, Principal Bench, New Delhi, whereby, the appeal filed by the respondent, against the order dated 31.3.2006 (Annexure A/2), passed by the Commissioner Central Excise, Delhi-III, Gurgaon, had been allowed.

2. The respondent-company is engaged in the production and clearance of Electric Control unit, Alternator Assy. etc. classifiable under Central Excise Tariff Hearing No. 9032.99/8511 of the 1st Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) and is also availing Modvat/CENVAT credit of duty paid on inputs and capital goods under Rule 3 of CENVAT CREDIT RULES , 2002/2004. During the course of audit of the respondent's records, for the period from September, 2003 to March, 2005, the staff of Central Excise Audit observed that the respondent had taken CENVAT credit in respect of the imported inputs, namely, stator Assy, spacer, rectifier assy, regulator assy, rotor, bearings etc., used in the manufacture of Alternator in terms of provisions of Rule 4 of CENVAT CREDIT RULES , 2002/2004. It was further observed that respondent has imported the goods under the cover of proper bill of entries and after getting custom clearance, directly sent under Notification No.214/86-CF dated 23.3.1986 as amended to M/s Lucas TVS Limited (hereinafter referred as 'Job Worker'), for further processing, and, job-work challans to this effect were issued by the respondent after taking CENVAT Credit of CVD paid thereon. After completion of job work at the job worker's premises, the processed goods i.e. semi furnished alternator, were sent by the job worker to the respondent under the cover of an invoice-cum-delivery challan showing therein the cost of customer's material plus job work charges @ Rs.375.00 per piece and payment of central excise duty (and education cess w.e.f. 5.7.2004) on such value (cost of customer's material plus job work charges) along with job work challan. The job worker did not avail benefit of Notification No. 214/86-CF dated 23.3.1986. The respondent then availed CENVAT credit on the job worked goods on the strength of such invoice-cum-delivery challans, as issued by the job worker. In the backdrop of these facts, the department concerned concluded that the respondent has availed CENVAT credit (duty + education cess) amounting to Rs.2,04,31,581/- on the basis of invoices-cum-challans, as issued by job worker, and, again Rs.1,78,93,790/- on the basis of B/E for the same inputs, during the period from 23.9.2003 to 29.3.2005. Considering the respondent to have taken double CENVAT credit, in contravention of Rule 3 of CENVAT CREDIT RULES , 2002/2004, read with Notification No. 214/86- CF dated 23.3.1986, a show cause notice was issued by the appellant to the respondent on 16.9.2005/ 21.9.2005.

3. Vide order dated 31.3.2006 (Annexure A/2), the Commissioner, Central Excise, disallowed the CENVAT credit of Rs.1,78,93,790.00, as availed and utilised by the respondent, and, ordered recovery of the above-said amount from the respondent. Moreover, the Commissioner, while disallowing the CENVAT credit to the respondent, held that the respondent had taken the credit on the same inputs and therefore, disallowed the CENVAT credit amounting to Rs.1,78,93,790.00 and imposed an equal penalty for mis-declaration and suppression of the facts. The relevant observation reads as under:-

"Their contention that rule 3 of the CENVAT Credit Rules allows credit of duty paid by job worker is not tenable. The rule 3 ibid allows credit of duty paid on any input Used in the manufacture of int