2025 (3) TMI 899 - AT - Central Excise

Appellant's battery recycling into lead alloys ruled not job work under N/N. 214/86-CE due to using own inputs instead of principal's materials

M/s Nile Limited Versus Commissioner of Central Tax Tirupati – GST

CESTAT Hyderabad dismissed the appeal where the appellant converted used batteries into scrap, then into pure lead, and finally into lead alloys by adding ... Admissibility of benefit of N/N. 214/86-CE - activities conducted by the appellant qualify as 'job work' or not - invocation of extended period of limitation - HELD THAT:- Admittedly appellant have used certain alloying elements when converting scrap into pure lead and leady alloys. The appellants, through an elaborate process, converted the used and defective batteries into scrap and thereafter, further converted it into pure lead and thereafter, again further converted it into lead alloys by using/adding certain elements like Antimony, Tin, Selenium, etc. It is also not in dispute that these three inputs are used by the appellant themselves and are not being supplied by the principal manufacturer. The wordings of the notification has to be construed strictly, as has been held by the Hon’ble Supreme Court in the case of CC (Import) vs Dilip Kumar & Co. [2018 (7) TMI 1826 - SUPREME COURT (LB)]. On a plain reading of the explanation, which defines what constitutes ‘job work’, it would be obvious that all the inputs or semi finished goods are to be sent by the principal manufacturer and the activities are to be undertaken by the job worker, which may or may not amount to manufacture - Once, it is not considered as job work, there has to be payment of duty as there is no other notification available for exempting the same and the plea that ultimately the principal manufacturer would have paid the duty on the same would be of no consequence when the duty is required to be discharged at the stage where the said manufactured goods are cleared from the factory where they are manufactured. Extended period of limitation - HELD THAT:- No substantive ground has been adduced by the appellant in support that there was a bonafide mistake or wrong understanding of the law - there is enough ground for the department to invoke extended period as there has been a deliberate suppression and misstatement of fact. Therefore, the extended period has been rightly invoked. Penalty u/s 11AC and under Rule 25 of Central Excise Rules, 2002 - HELD THAT:- Penalties are sustainable and upheld. Conclusion - i) Substantial additions by a job worker disqualify activities from being considered job work under Notification No. 214/86-CE. ii) The demand for duty and the imposition of penalties upheld. iii) The extended period has been rightly invoked. Appeal dismissed. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment are:Whether the activities conducted by the appellant qualify as 'job work' under Notification No. 214/86-CE, given the use of additional inputs not supplied by the principal manufacturer.Whether the invocation of the extended period for demand is justified under the circumstances.Whether the penalties imposed under section 11AC and Rule 25 of the Central Excise Rules, 2002, are appropriate.ISSUE-WISE DETAILED ANALYSIS1. Qualification as 'Job Work' under Notification No. 214/86-CERelevant legal framework and precedents: Notification No. 214/86-CE exempts certain job work activities from excise duty, provided the job work is performed using materials supplied by the principal manufacturer. The Supreme Court's decision in M/s Prestige Engineering (India) Ltd Vs CCE, Meerut, clarified that job work involves using materials supplied by the customer, with minor additions permissible.Court's interpretation and reasoning: The Tribunal interpreted that the appellant's use of Antimony, Tin, Selenium, etc., which are not minor additions, disqualifies the activities from being considered as job work under the notification. The Tribunal relied on the precedent set by the Supreme Court in the Prestige Engineering case, emphasizing that substantial additions by the job worker transform the nature of the work beyond the scope of job work.Key evidence and findings: The appellant used significant quantities of additional inputs to convert lead scrap into lead alloys, which are distinct products. These additional inputs were not supplied by the principal manufacturer, which is a critical factor in the Tribunal's decision.Application of law to facts: The Tribunal applied the legal definition of job work and determined that the activities performed by the appellant, involving substantial additional inputs, do not qualify as job work under Notification No. 214/86-CE.Treatment of competing arguments: The appellant argued that the additional inputs were negligible and akin to consumables. However, the Tribunal found that the inputs were essential for the production of lead alloys and could not be considered minor.Conclusions: The Tribunal concluded that the activities do not qualify as job work under the notification, and thus, the exemption from duty does not apply.2. Invocation of Extended Period for DemandRelevant legal framework and precedents: The extended period for demand under Central Excise law can be invoked in cases of suppression of facts or willful misstatement. The Tribunal considered the precedent set in the case of CCE, Surat-I Vs Neminath Fabrics Pvt Ltd.Court's interpretation and reasoning: The Tribunal found that the appellant's actions constituted a misstatement of facts, as they used additional inputs despite prior communication indicating otherwise. This justified the invocation of the extended period.Key evidence and findings: The Tribunal noted the appellant's prior communication with the jurisdictional authorities and the subsequent use of additional inputs not disclosed initially.Application of law to facts: The Tribunal applied the criteria for invoking the extended period, finding that the appellant's conduct met the threshold for suppression of facts.Treatment of competing arguments: The appellant argued that prior knowledge of the department negated the need for the extended period. The Tribunal rejected this, distinguishing the prior SCN as unrelated to the current issue.Conclusions: The Tribunal upheld the invocation of the extended period for demand, finding it justified by the appellant's conduct.3. Imposition of PenaltiesRelevant legal framework and precedents: Penalties under section 11AC and Rule 25 of the Central Excise Rules, 2002, are applicable for willful evasion of duty.Court's interpretation and reasoning: The Tribunal found that the penalties were justified due to the appellant's deliberate suppression of facts and misstatement.Key evidence and findings: The Tribunal relied on the appellant's conduct and the findings of misstatement and suppression to justify the penalties.Application of law to facts: The Tribunal applied the legal standards for imposing penalties, finding that the appellant's actions warranted such measures.Treatment of competing arguments: The appellant did not provide sufficient evidence or argument to counter the imposition of penalties.Conclusions: The Tribunal upheld the penalties imposed under section 11AC and Rule 25, finding them appropriate given the circumstances.SIGNIFICANT HOLDINGSCore principles established: The Tribunal reinforced the principle that substantial additions by a job worker disqualify activities from being considered job work under Notification No. 214/86-CE.Final determinations on each issue: The Tribunal dismissed the appeals, upholding the demand for duty and the imposition of penalties. The activities were not considered job work, the extended period for demand was justified, and the penalties were appropriate.