2024 (1) TMI 514 - AT - Central Excise

Machining activities under Central Excise Act exempt from CENVAT credit reversal under Rule 6(3)

The CESTAT Mumbai held that the appellant's CENVAT credit denial was incorrect. The revenue authorities wrongly applied Rule 6(3) of CENVAT Credit Rules, ... CENVAT Credit - denial on the ground that Appellant had not followed the procedure contained in Rule 6(3) of the CENVAT Credit Rules, 2004 and not reversed proportionate credit against exempted services provided by it as job worker - HELD THAT:- When Notification No. 214/86-CE was issued tax on service activities was not in existence, for which the activity of Appellant, since did not involve sale or transfer of title in any goods or moveable or immoveable property, as referred in the Commissioner’s order in para 2 under facts of the case without the same being alleged in the show-cause notice, cannot be accepted as an issue covered under excise provisions as the entire activities were covered under the said Notification No. 214/86-CE issued under Central Excise Act, as apparently he was hinting at the definition of Sales Tax and not at the Central Excise Act. Moreover, under serial No. 30 of Notification No. 25/2012-S.T., certain definite activities are defined to have been covered under the job work and exempted from the purview of Service Tax but those relates to processes on selected intermediate production and not production of any kind of goods or goods in general. In the instant case the nature of resultant output from the job workers end is not referred anywhere in the entire appeal case record including show-cause notice, orders etc., except that nature of work undertaken by it is mentioned as machining of shaft and rollers but whether the final outcome of the same would be a marketable product without any further development by the principal/original manufacturer is not forthcoming form the show-cause notice or from the orders. In Hema Engineering Industries Ltd. [2017 (5) TMI 1347 - CESTAT NEW DELHI], placing reliance on which learned Commissioner (Appeals) had passed his order, Notification No. 08/2005-S.T. was considered therein so as to determine exemption from Service Tax only when the process undertaken doesn’t amount to manufacture but in the instant case it has not been determined as to if Appellant was processing an intermediate product or was manufacturing the same since serial No. 30 of Notification No. 25/2012-S.T. has clearly categorised specified items for processing as intermediate product like products on agriculture, printing, textile, polishing diamonds and gemstones etc. that would fall under it but Appellant’s activity doesn’t fall into it. Other works like doing agriculture or manufacturing textile since are different from processing of products of agriculture or textile processing, machining of shaft or rollers could also be different from manufacturing of shaft or rollers but when for decades, Appellant has been allowed to avail the benefit of Central Excise Notification No. 214/86-CE, its activity can only be considered as an activity covered under Central Excise Act and not rendering of a service, so as to invoke the provision contained in Rule 6 of the CENVAT Credit Rules, 2004. Appeal allowed. Issues involved: Denial of CENVAT Credit under Rule 6(3) of CENVAT Credit Rules, 2004 and recovery of demand under Rule 14 along with interest and penalty.Summary:1. Facts of the case: The Appellant, a manufacturer of excisable goods, also carried out job work activities for other principal manufacturers. The Department issued a show-cause notice demanding recovery for not maintaining separate records for job work carried out by the Appellant as exempted service. 2. Appellant's Argument: The Appellant's counsel cited various judgments in favor of the Appellant, emphasizing that job work activities should not be considered as exempted services. The Appellant argued that the excisable goods manufactured by the job worker cannot be treated as a service, and there is no evidence of common inputs to raise a demand.3. Respondent's Argument: The Authorized Representative argued that job work activities are exempted services under Notification No. 25/2012-ST. He contended that the Appellant's case is covered by a Supreme Court decision and interference by the Tribunal is unwarranted.4. Analysis: The Tribunal noted that the show-cause notice was based on the Appellant availing benefits under a specific Central Excise Notification. The nature of the Appellant's activities did not involve the transfer of title in goods, and the activities were not covered under excise provisions. The Tribunal highlighted that the nature of the final outcome of the job work was not clear from the records.5. Conclusion: The Tribunal allowed the appeal, setting aside the order of the Commissioner of Central Tax (Appeals-I), Pune, and providing consequential relief to the Appellant.Decision: The appeal is allowed, and the order of the Commissioner of Central Tax (Appeals-I), Pune is set aside with any consequential relief.