2017 (12) TMI 602 - AT - Central Excise

Tribunal upholds duty demand, sets aside penalty, emphasizes exemption conditions

The Tribunal partly allowed the main appellant's appeal, upholding the duty demand and penalty while setting aside the penalty imposed on the second ... Benefit of N/N. 214/86-CE dated 25.03.1988 - denial on the ground that no excise duty was paid on the final products manufactured out of job worked goods by the principal manufacturer - Held that: - The specified goods manufactured in a factory as a job work are exempt when they are used in relation to the manufacture of the final products on which duty of excise is leviable in whole or in part - Admittedly, the final products which are manufactured using the goods manufactured by the appellant in job work did not suffer any duty of excise. This is clearly a violation of the main condition of N/N. 214/86. As such there is no question of eligibility of the appellant for the said exemption. Extended period of limitation - penalty - Held that: - It is not open the appellant to disassociate activity in isolation as the exemption Notification No.214/86 is availed with the conditions put on both principal manufacturer and job worker. Failure of any one of the obligations will make the exemption unavailable - penalty upheld. Appeal allowed in part. Issues:1. Eligibility for exemption under Notification No.214/86-CE.2. Claim for cenvat credit on inputs used in job work.3. Quantification of duty demand.4. Sustainability of demand for an extended period.5. Legality of penalty imposed on the second appellant.Eligibility for Exemption under Notification No.214/86-CE:The case involved appeals against an order by the Commissioner of Central Excise, Jaipur, where the appellants were engaged in manufacturing copper wires on job work basis. The issue was whether the appellants were eligible for exemption under Notification No.214/86-CE. The Tribunal held that the appellants were not eligible for exemption as the final products manufactured using job work did not suffer any excise duty, violating the main condition of the notification. The Tribunal referred to relevant case law and upheld the demand for Central Excise duty and penalty against the main appellant.Claim for Cenvat Credit on Inputs Used in Job Work:The original authority rejected the appellant's claim for cenvat credit on inputs used in job work, stating that the claim was not part of the show cause notice. However, the Tribunal found this rejection not legally sustainable. It referred to Supreme Court decisions and ruled that the appellant could be eligible for cenvat credit subject to verification by the jurisdictional officer, based on the duty paid nature of inputs and fulfillment of conditions under Cenvat Credit Rules, 2004.Quantification of Duty Demand:The appellants contested the quantification of duty demand, citing a Supreme Court decision. The original authority had not considered supporting documents for re-quantification. The Tribunal ruled that since cenvat credit was found to be eligible, documentary evidence submitted by the appellant needed examination for re-quantification of excise duty value. The Tribunal also mentioned the appellant's claim for cum duty benefit, subject to verification by the original authority.Sustainability of Demand for an Extended Period:The appellants argued against the demand for an extended period, claiming a bonafide belief in eligibility for exemption. However, the Tribunal held that the appellant failed to fulfill the conditions of the exemption notification, making the demand sustainable. The Tribunal emphasized that the appellant's responsibility included ensuring all conditions were met, and failure to pay excise duty on the final product rendered the exemption unavailable.Legality of Penalty Imposed on the Second Appellant:The penalty imposed on the second appellant was challenged, stating his appointment as Director was after the disputed period. The Tribunal found the penalty not sustainable, setting it aside and allowing the appeal by the second appellant. The main appellant's appeal was partly allowed, with directions to discharge Central Excise duty and for the original authority to determine cenvat credit eligibility and re-quantification of duty liability.In conclusion, the Tribunal partly allowed the main appellant's appeal, upheld the duty demand and penalty, set aside the penalty on the second appellant, and provided directions for cenvat credit eligibility and re-quantification of duty liability.