TaxTMI 
TaxTMI 
2012 (7) TMI 713
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....credit availed during April 2007 to June 2008 along with interest and imposition of penalty of equal amount. 1.4. Appeal No. 1160/2009 is by Shri M. Subramani against imposition of penalty of Rs. 25,00,000/- by the above order dated 25.09.2009. 1.5. These four appeals arising out of two different orders of Commissioner are closely interconnected and, therefore, are being dealt with by this common order. 2. Heard both sides extensively. 3.1. The relevant facts, in brief, are as follows: 3.2. Federal Mogul TPR (India) Ltd. (hereinafter referred to as manufacturer-appellant) and Federal Mogul Goetze (India) Ltd. (hereinafter referred to as job worker-appellant) are sister concerns and both are engaged in manufacture of excisable goods namely, piston rings. The manufacturer-appellant has taken CENVAT credit of duty paid on such piston rings in coil form. The job worker-appellant has facility for undertaking chrome plating work. The job worker-appellant received piston rings in coil form under material movement challans from the manufacturer and undertook chrome plating and returned to the manufacturer-appellant who used the chrome plate....
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....ellant. 4.2 It was held that the job worker-appellant had wrongly paid service tax and consequently passed on inadmissible CENVAT credit amounting to Rs, 2,02,00,275/- during the period April 2005 to June 2008 to the manufacturer-appellant and, accordingly, show-cause notice dated 09.01.2009 was issued to the manufacturer-appellant proposing recovery of the said amount and proposing imposition of penalties on Shri Subramani and others. In pursuance of the show-cause notice, the Commissioner vide impugned order dated 22.09.2009 confirmed the demand as proposed along with interest and imposed equal amount of penalty on the manufacturer-appellant. In addition, he imposed a penalty of Rs. 25,00,000/- on Shri M. Subramani who is the other appellant. There is also a penalty of Rs. 25,00,000/- on Shri Rajan Luthra whose appeal, if any, is not before us. 5.1. Learned Advocate for the appellants challenged the demands and imposition of penalties on various grounds. Main submissions are as follows: (a) The finding of the Commissioner that the job worker-appellant has wrongly paid excise duty on the activity of chrome plating as it was exempted under notification....
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....) i) CCE & Cus., Vadodara Vs. Narmada Chematur Pharmaceuticals Ltd. - 2005 (179) ELT 276 (SC) j) CCE, Chandigarh Vs. Industrial Cables (I) Ltd. - 1999 (108) ELT 513 (Tri.) k) Shriram Properties Ltd. Vs. CST, Bangalore - 2007 (7) STR 3 (Kar.) l) Hero Cycles Ltd. & Anr. Vs. CCE, Chandigarh - 2003 (54) RLT 764 (CEGAT-Del.) 6. Learned Joint CDR strongly defended the orders of the Commissioner. He drew our attention to the finding that the process of chrome plating does not amount to manufacture in terms of Section 2 (f) of the Central Excise Act and, therefore, the job worker paying excise duty during certain period is not justified. Further the job worker paying service tax when the service tax is exempted under Notification 8/2005 ST is also not warranted. 7.1 We have carefully considered the submissions from both sides and perused the records. 7.2. The department s case against the job worker-appellant rests on a few major findings. Firstly chrome plating has been held as not amounting to manufacture and, therefore, excise duty on chrome plated piston rings should not have been paid by the job worker appellant. The second finding is to the effect t....
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.... by him for the job work. In other words, in respect of job-worked item the raw materials are contributed partly by the principal manufacturer and the rest by the job worker. Labour is contributed by the job worker. When the job-worked items are received back by the principal manufacturer, the same may be used for further manufacture or may be sold as such. When the final products are sold by the principal manufacturer obviously the value of job charges also become part of the cost of the materials so sold. 8.3. When the processes/activities undertaken by the job worker amounts to manufacture, the job worker is construed as the manufacturer and, therefore, the job worker becomes liable to pay excise duty. However, by Notification No. 214/86 CE dated 25.03.1986, it has been provided that instead of the job worker, the liability can be discharged by the principal manufacturer subject to the conditions mentioned in the said notification. 8.4. CENVAT Credit Rules provide for taking credit by the principal manufacturer and sending the material without reversing the credit for the purpose of job work. It also provides for taking credit on any input or input service us....
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....chrome plated piston rings are not treated as excisable goods at the hands of job worker-appellant, the question of availing any exemption at his end does not arise and therefore, the said goods cannot be treated as exempted goods. 9.4. Rule 4 (5) (a) of the CENVAT Credit Rules reads as under: The CENVAT credit shall be allowed even if any inputs or capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair, re-conditioning [, or for the manufacture of intermediate goods necessary for the manufacture of final products] or any other purpose, and it is established from the records, challans or memos or any other document produced by the manufacturer or provider of output service taking the CENVAT credit that the goods are received back in the factory within one hundred and eighty days of their being sent to a job worker and if the inputs or the capital goods are not received back within one hundred eighty days, the manufacturer or provider of output service shall pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods by debiting the CENVAT credit or otherwise, but the....
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....ties of job work was held to be eligible for credit on such inputs even though the job-worked goods were returned to the principal manufacturer without payment of duty by the said job worker. The relevant portion of the said decision is as under: Modvat credit of duty paid on the inputs used in the manufacture of final product cleared without payment of duty for further utilization in the manufacture of final product, which are cleared on payment of duty by the principal manufacturer, would not be hit by provision of Rule 57C. Inasmuch as, the matter stands decided by the Honour ble Supreme Court, we would hold in favour of assessee. 10.1. One of the issues to be considered is whether the Notification 214/1986 is an unconditional notification and therefore the job worker-appellant should have availed the said notification as contemplated under Section 5A(1A) of the Central Excise Act. The Notification No. 214/86 during the relevant period reads as under: In exercise of the powers conferred by sub-section (1) of section 5A of Central Excise Act, 1944 (1 of 1944), read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special....
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....le thereon, which is specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), the additional duty of excise leviable thereon, which is specified in the Schedule to the said Special Importance Act and National Calamity Contingent duty leviable under sub-section (1) of section 136 of the Finance Act, 2001 (14 of 2001). (2) The exemption contained in this notification shall be applicable only to the said goods in respect of which,- (i) The supplier of the raw materials or semi-finished goods gives an undertaking to the Assistant Commissioner of Central Excise having jurisdiction over the factory of the job worker that the said goods shall be (a) used in or in relation to the manufacture of the final products in his factory; or (b) removed without payment of duty from his factory; (i) under bond for export, or (ii) to a unit in a free trade zone or to a hundred per cent Export-oriented undertaking or to unit, an on electronic Hardware Technology Park or Software Technology Parks or supplied to the United Nations or an international organization for their official use or supplied to p....
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....e of excisable goods which are ultimately cleared on payment of duty. In other words, it does not exempt the duty on the job-worked items but it merely shifts the liability to a person other than the job worker and also shifts the date of payment of duty that is instead of reckoning from the date of clearance from the premises of the job worker, the same is to be reckoned from the date of clearance by the principal manufacturer (the person who supplied material to the job worker for the purpose of getting job work done). To consider this notification as an unconditional notification and to hold that the job worker-appellant should not have paid the duty may not be appropriate. 10.3. There is another reason for not forcing any job worker to avail the benefit of Notification No. 214/86 CE dated 25.03.1986. The job worker is not expected or required to know the nature of disposal of job-worked goods sent by him to the supplier. The condition regarding payment of the duty on the final products manufactured using job-worked items sent by the job worker is to be fulfilled by the principal manufacturer. The job worker cannot be expected to compel the principal manufacturer to ta....
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....manufacture of any other goods falling under the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), as amended by the Central Excise Tariff (Amendment) Act, 2004 (5 of 2005), on which appropriate duty of excise is payable. Explanation. - For the purposes of this notification, - (i) the expression production of goods means working upon raw materials or semi-finished goods so as to complete part or whole of production, subject to the condition that such production does not amount to manufacture within the meaning of clause (f) of section 2 of the Central Excise Act, 1944 (1 of 1944); (ii) appropriate duty of excise shall not include Nil rate of duty or duty of excise wholly exempt. 11.4. The above notification has been issued under Section 93 (1) of the Finance Act and the exemption is subject to the condition that appropriate duty of excise is paid by the sender of the raw materials or semi-finished goods. In other words, any job worker who undertakes services of processing is not free to opt for the benefit of the said notification unless the recipient of the services pays appropriate duty of excise on the goods returned back by the job worker. Th....