TaxTMI 
TaxTMI 
2014 (12) TMI 953
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....ly, central excise duty of Rs. 73,28,419/- was levied on the appellant followed by penalty of equal amount under section 11AC of the Central Excise Act, 1944 (hereinafter referred to as "the Act") and interest on the duty imposed. 1.2 According to the ld. Authority when the appellant failed to file the required declaration to claim area based exemption, department was deprived of examining whether the appellant was entitled to the exemption before its first clearance was made. That resulted in denial of benefits of notification No.50/2003-CE dated 10/06/2003 to it. Ld. Adjudicating Authority detailed in Para 53 of the adjudication order as to the requirement of the declaration which ought to have been filed to avail exemption and that was to remain intact during the relevant Financial Year. In the absence of declaration it was the inference of the authority that there was no fulfilment of substantial condition of the notification and such failure to furnish relevant particulars for consideration of the claim before first clearance should deny area based exemption to the appellant. 1.3 Appellant's plea that they being job workers in the campus of Hindustan Unilever Ltd. (h....
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.... registration with effect from 06.07.2005 (page 89 of appeal folder) and was granted the same. Thereafter, separate registration for Barotiwala (where the appellant carried out the activity of banding) was obtained with effect from 06.09.2007. Service tax returns in STR-3 Forms (Ref: at pages 125 - 158 of appeal folder) were filed and service tax paid. This amounts to exercise of option as the activity undertaken was reflected in those documents. 4.3 HUL was sending goods under Notification No.214/86-CE, dated 25.03.1986 to the appellant to provide service of banding the goods by a strip. Appellant bona fide believed that the activity carried out by appellant was labour oriented and no manufacturing process carried out. Such labour work was supply of manpower and was governed by the taxing entry of Finance Act, 1994 "manpower recruitment agency service" and not a manufacturing activity. With such belief no declaration as required by Notification No.50/2003-CE, dated 10.06.2003 was filed. There was no deliberate default made by the appellant to file the declaration as required by Notification No.50/2003, dated 10.06.2003. Having obtained service tax registration, the appellant al....
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....d taxes paid by it were taken into treasury which is well within the knowledge of the Department. Therefore, the appellant has never caused any suppression or made mis-declaration of any fact to the Department. Nor there was any intention to evade. Accordingly, the adjudication was time barred. Appellant not having any intention to cause evasion of Revenue, absence of exercise of option without input particulars does not debar it from the benefit of Notification No.50/2003-CE, dated 10.06.2003. 4.7 It was lastly argued by the appellant that the service tax paid by the appellant having been taken into treasury by the Department that became input tax and duty paid on the input used by HUL in manufacturing of soap case is admissible as CENVAT credit to the appellant. 4.8 On such submissions, it was submitted that there cannot be penal provisions applicable to the facts and circumstances of the case of the appellant. 5.1 To support the contentions above, appellant relied on the following decisions:- (i) Gillette India Ltd. Vs. Commissioner of Central Excise, Chandigarh [2011 (272) ELT 154 (Tri. - Del.)] (ii) CCE, Pune Vs. Sinar Mas P....
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.....2 Appellant relied on Para 3 of the Board Circular No. 908/28/2009-CX, dated 28.12.2009, to submit that the benefit of exemption is to be given to the activity of manufacture of the main product as well as the peripheral activity undertaken in the specified area of Uttarakhand or Himachal Pradesh. Peripheral activity alone undertaken by job worker in the specified area is also entitled to exemption. It was also precisely submitted that neither banding gives rise to a new product nor such activity makes the goods marketable without any value addition thereto. The place where peripheral activity of banding was carried out by the appellant was situated in Barotiwala of Solan district in Himachal Pradesh. The principal manufacturer, HUL as well as the appellant having been situated in the same campus, the circular brings the appellant to the similar footing with HUL for exemption since HUL was granted area based exemption in respect of manufacturing activity. 6.1 Revenue, on the other hand, submits that registration under Central Excise Act was necessity of law to grant area based exemption as per Notification. The appellant failed to take registration under the Act being a manufac....
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.... by it. The banding activity carried out by the appellant also followed fixation of MRP. Chapter Note 6 of Chapter 34 brought out such activity to the ambit of "manufacture" since the goods were MRP based and ld. authority dealt the issue in paras 44, 45 and 46 of the adjudication order. So also, ld. authority examined in Para 36 of the adjudication order as to application of provisions of section 2(f) of the Act to the case of the appellant to hold it as "manufacturer". The Authority, accordingly, held that the appellant carried out manufacturing activity which is clear from Para 47 of the adjudication order. 6.5 Revenue further submitted that huge Revenue was lost due to mis-declaration by appellant as has been recorded in Para 77 of the adjudication order. When it failed to satisfy learned authority filing appropriate declaration, it was disentitled to the benefit of exemption Notification and duty evaded was rightly ordered to be paid with interest and penalty. That does not call for interference. When certain procedure was prescribed by law to claim exemption benefit, failure to follow the same disentitles a claimant thereto. Appellant having given go-by to the set of proce....
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.... laid down by HUL." 9.2 In the course of investigation, statement recorded from Shri Ravichandran, Manager of the appellant on 20.12.2007 exhibited that the appellant was engaged in loading and unloading of materials and packing materials of HUL during the period from April, 2006 to October, 2007. They had done soap banding job for HUL and to do such banding, they were receiving soap cakes of different brands from HUL and repacked the same after banding the cakes as per scheme of HUL e.g. "buy 4 pcs get Rs. 5 off". Appellant was to unpack the soap cakes from cardboard cartons and band 4 pieces with plastic/paper stickers on which the scheme is printed. After banding the soap cakes, they were repacked in the same cardboard cartons and retuned back to HUL. To do all such work they were getting service charges from HUL and paid service tax. 9.3 When Shri SK Jain, Senior Commercial Manager of HUL was examined, in a statement dated 27.08.2008, he revealed that packed soaps in cartons along with banding tape were sent to appellant and they were required to pack the same as per requirement of HUL taking out single pack soap from the cartons. The combo packs were again packed in the ....
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....was barred from availing benefit thereof. The appellant claimed that it was entitled to the benefit of exemption as a job worker under Notification No.214/86-CE, dated 25.03.1986. But ld. adjudicating authority held that the appellant was not a job worker and in Para 74 of adjudication order disallowed benefit of this Notification on the ground that only if the goods are cleared by the principal manufacturer on payment of duty from factory, the job worker is entitled to benefit thereof. It may be stated that the goods cleared by HUL were duty free availing exemption by virtue of Notification No.50/2003-CE, dated 10.06.2003. 10.2 The order of adjudication at page 8 shows that single packed unit of soaps were sent to the appellant by HUL in cartons and the appellant was required to make combo packs as per requirement of HUL after taking out the single pack soaps from the cartons. 4, 3, 2 or single soap cake were banded together with tape on which brand name and MRP of the combo pack was mentioned. The combo packs were again packed in the same cartons and were sent to HUL for further despatches. The MRP and single unit of soap was not mentioned on the individual packs as the indivi....
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....ducts of this Chapter, labelling or re-labelling of containers and repacking from bulk pack to retail packs or adoption of any other treatment to render the product marketable to the consumer, shall amount to manufacture". [Emphasis supplied] With effect from 01.03.2008, the said Note reads as under:- "6. In relation to products of this Chapter, labelling or re-labelling of containers or repacking from bulk pack to retail packs or the adoption of any other treatment to render the product marketable to the consumer, shall amount to manufacture". [Emphasis supplied] 10.4 Reading of Chapter Note 6 as appearing in statute book before 01.03.2008 has following ingredients:- (a) labelling or re-labelling of containers and re-packing from bulk pack to retail packs to render the product marketable amounted to manufacture; or (b) Adoption of any other treatment to render the product marketable to the consumer amounted to manufacture. Above definition says that the activity of labelling or re-labelling of containers followed by re-packing from bulk packs to re....
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.... reads as under:- "4. The exemption contained in this Notification shall not apply to such goods which have been subjected to only one or more of the following process, namely, preservation during storage, clearing operations, packing or repacking of such goods in a unit container, sorting, declaration or alteration of retail sale price and have not been subject to any other process or processes amounting to manufacture in the State of Uttaranchal or Himachal Pradesh." [Emphasis supplied] However, CB&EC vide its Circular No.908/28/2009-CX, dated 23.12.2009 (F.No.101/2/2009-CX-3) clarified that the benefit of Notification No.49/2003-CE and No.50/2003-CE, both dated 10.06.2003 as amended by Notification No.1/2008-CE, dated 18.01.2008 should be available, to such goods where both the activities of manufacture of the main product and the principal activities are undertaken in the specified areas in the States of Uttarakhand or Himachal Pradesh even if peripheral activity alone is undertaken by job workers in the specified areas. 12.2 The appellant banding more than one soap by a preprinted band affi....
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....rity. 13. Hon'ble supreme Court in Associated Cement Companies Ltd. v. State of Bihar & Ors., (2004) 7 SCC 642, while explaining the nature of the exemption notification and also the manner in which it should be interpreted has held: "12. Literally "exemption" is freedom from liability, tax or duty. Fiscally it may assume varying shapes, specially, in a growing economy. In fact, an exemption provision is like an exception and on normal principle of construction or interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden of progressive approach of fiscal provisions intended to augment State revenue. But once exception or exemption becomes applicable no rule or principle requires it to be construed strictly. Truly speaking, liberal and strict construction of an exemption provision is to be invoked at different stages of interpreting it. When the question is whether a subject falls in the notification or in the exemption clause then it being in the nature of exception is to be construed strictly and against the subject....
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....l contradiction amongst the judgments at all. The synthesis of the views is quite clearly that the general rule is strict interpretation while special rule in the case of beneficial and promotional exemption is liberal interpretation. The two go very well with each other because they relate to two different sets of circumstances. "[Emphasis supplied] 16. Filing of declaration before first clearance being necessity of notification, that cannot be given goby following the ratio laid down in Paras 24 and 27 of the judgment in the case of State of Jharkhand Vs. Ambay Cements [2004 (178) ELT 55 (SC)] as under:- "24. In our view, an exception or an exempting provision in a taxing statute should be construed strictly and it is not open to the Court to ignore the conditions prescribed in the Industrial Policy and the exemption Notifications. [Emphasis supplied] 26. Whenever the statute prescribes that a particular act is to be done in a particular manner and also lays down that failure to comply with the said requirement leads to severe consequences, such....