2013 (11) TMI 1079 - AT - Central Excise

Interpretation of Service Tax Notification & CENVAT Credit Rules for Exemption on Metallic Springs

The case involved a dispute regarding the interpretation of Notification No.8/2005-ST for business auxiliary service exemption and the applicability of ... Utilization of Common input service – Manufacture of Metallic Springs and Semi Furnished Metallic springs on Job work basis – Clearance of Exempted goods under Rule 6(3) of CC Rules 2004 - Benefit of Exemption Notification 214/86 and 8/2005 – Waiver of Pre-deposit – Held that:- Following Sterlite Industries (I) Ltd. vs. CCE [2004 (12) TMI 108 - CESTAT, MUMBAI] - Both the Notifications No.8/2005 and No.214/86 provided exemption for business auxiliary service and for the products from excise duty respectively on the condition that the person who receives the service or receives the goods on which benefit of Notification No.214/86 has been availed pays duty on the finished goods - The benefit can be extended to the appellant on a prima facie basis - the goods for job work were received by appellants under Rule 4(5)(a) of CENVAT Credit Rules, 2004 and CENVAT credit had been taken on the inputs which makes it obligatory for the principal manufacturer to clear the finished goods on payment of duty only – thus there shall be waiver of pre-deposit and stay against recovery during the pendency of the appeal – stay granted. Issues:1. Interpretation of Notification No.8/2005-ST regarding business auxiliary service exemption.2. Applicability of Rule 6(3) of CENVAT Credit Rules, 2004 on the clearance of semi-finished metallic springs.3. Comparison of Notification No.8/2005 and No.214/86 conditions for availing exemptions.Analysis:1. The case involved the appellant, a manufacturer of springs, engaging in the manufacture of semi-finished metallic springs for other parties. The dispute arose over whether the conversion of raw materials into semi-finished metallic springs qualifies as manufacture. The appellants claimed the benefit of Notification No.8/2005-ST for business auxiliary services, which covers situations where processes undertaken do not amount to production or manufacture. However, proceedings were initiated against the appellant for utilizing common input services for both dutiable and exempted products, leading to a demand confirmation with interest and penalty.2. The appellant relied on a Tribunal decision upheld by the High Court to argue that clearances of final products on which job work was done and cleared without payment of duty, but later cleared on payment of duty, should not be considered as clearance of exempted goods for the purpose of Rule 6(3) of CENVAT Credit Rules, 2004. The appellant contended that even though they availed the benefit of exemption under Notification No.8/2005-ST, the condition for availing the exemption is similar to that of Notification No.214/86, requiring finished products to be cleared on payment of duty.3. The Assistant Commissioner argued that despite the appellant availing the benefit of Notification No.8/2005, the condition for exemption differs from that of Notification No.214/86. The exemption under Notification No.8/2005 is not an incentive scheme, and thus, 8%/10% of the value as per Rule 6(3) of CENVAT Credit Rules, 2004 becomes payable. The Tribunal found that the case falls within the purview of the decision of the Larger Bench, upholding the requirement that finished goods must be cleared on payment of duty for availing exemptions under both notifications. The waiver of pre-deposit and stay against recovery during the appeal was granted based on the appellant's compliance with CENVAT Credit Rules, 2004.This judgment clarifies the application of Notification No.8/2005-ST and Rule 6(3) of CENVAT Credit Rules, 2004 in cases involving the clearance of dutiable and exempted products, emphasizing the necessity of clearing finished goods on payment of duty to avail exemption benefits.