2015 (11) TMI 38 - AT - Central Excise

Tribunal rules in favor of job worker on duty payment, reaffirming manufacturer's liability

M/s Dhana Singh Synthetics Pvt Ltd Versus Commissioner of Central Excise, Customs And Service Tax-Vapi

The Tribunal upheld the interpretation that the job worker was not required to pay duty when sending processed goods back to the principal manufacturer ... CENVAT Credit - Job works - Held that:- There is no dispute on the facts that the appellant received the fabrics under the cover of Central Excise Challans issued under Rule 57F(4) of the erstwhile Central Excise Rules and corresponding Rule of Central Excise Rules, 2012. The appellant after due process of fabrics returned the goods to the raw-material supplier, who used in the manufacture of finished products and cleared on payment of duty. - In such cases, duty liability is required to be discharged by manufacturer and not by the job worker. Accordingly, the job worker is not eligible to avail credit in such situation. Duty on inputs used in the manufacture of final products cleared without payment of duty for further utilisation in manufacture of final product, which were cleared on payment of duty by principal manufacturer, on job work basis not hit by provisions of Rule 57F of erstwhile Rule. Rule 57F(4) of the erstwhile Rule corresponding to Rule 4 (5)(a) of the Cenvat Credit Rule 2002, permits the manufacturer to clear the goods to job worker without payment of duty for processing. There is no dispute that the job-work materials were used in manufacture of finished goods by the principal manufacturer, who cleared the goods on payment of duty. Thus, it is the case of Revenue neutral in so far as the payment of duty by the job-worker will enable the principal manufacturer to avail cenvat credit. Hence we find that the order passed by the Adjudicating authority is legal and proper. - Decided in favour of assessee. Issues:1. Interpretation of Rule 57F(4) of the erstwhile Central Excise Rules and Rule 4(5)(a) of Cenvat Credit Rules.2. Applicability of Notification No 214/86-CE.3. Liability of duty on job work basis.4. Legal validity of the Adjudicating Authority's decision.Analysis:Issue 1: Interpretation of Rule 57F(4) and Rule 4(5)(a):The case involved a dispute regarding the interpretation of Rule 57F(4) of the erstwhile Central Excise Rules and Rule 4(5)(a) of the Cenvat Credit Rules. The Tribunal noted that the job worker was entitled to receive inputs for job work and return the processed goods without payment of duty under Annexure II Challan to the principal manufacturer. The Adjudicating Authority's findings supported this interpretation, emphasizing that the job worker was not required to pay duty while sending the processed goods back to the principal manufacturer. The Tribunal upheld this interpretation, highlighting the provisions allowing the manufacturer to clear goods for processing without payment of duty.Issue 2: Applicability of Notification No 214/86-CE:The Commissioner (Appeals) observed that the benefit of Notification No 214/86-CE was not available to the appellant during the relevant period. It was clarified that under Rule 57F(4), the duty liability is on the manufacturer, not the job worker. The Tribunal referred to a CBEC circular and previous judgments to support the position that duty on inputs used in the manufacture of final products on job work basis is not hit by the provisions of Rule 57F.Issue 3: Liability of duty on job work basis:The Tribunal analyzed previous judgments, such as M. Text & DK Processors Pvt Ltd Vs CCE, Jaipur, and M/s Sterlite Industries (I) Ltd vs. CCE, Pune, to establish that duty on inputs used in the manufacture of final products on job work basis is the responsibility of the principal manufacturer, not the job worker. The Tribunal concluded that the duty payment by the job worker enables the principal manufacturer to avail Cenvat credit, making the revenue neutral.Issue 4: Legal validity of the Adjudicating Authority's decision:The Tribunal found that the Adjudicating Authority's decision to drop the proceedings initiated under the show cause notice was legal and proper. After considering all arguments and perusing the records, the Tribunal set aside the impugned order and restored the adjudication order, thereby allowing the appeal filed by the appellant.In conclusion, the Tribunal's detailed analysis clarified the interpretation of relevant rules, the applicability of notifications, the duty liability on job work basis, and upheld the legal validity of the Adjudicating Authority's decision.