TaxTMI 
TaxTMI 
2015 (11) TMI 95
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....ties on job work basis. The goods manufactured for third parties bear the brand name of those third parties and in respect of such goods manufactured for third parties, the assessees paid the normal duty of excise but at the same time availed the benefit of MODVAT/CENVAT credit as well. Thus, to put it succinctly, the real issue is as to whether availing the benefit of MODVAT/CENVAT credit in respect of branded goods of third parties manufactured by the assessees on job work basis, disentitles them from availing the benefit of the aforesaid Notifications? 3) The assessee in Civil Appeal No. 2789 of 2007 is the manufacturer of medicaments which fall under Chapter Heading 30 of the First Schedule of the Central Excise Tariff Act, 1985 (hereinafter referred to as the "CETA, 1985"). In addition, it is manufacturing medicines under the brand name belonging to third parties, viz., M/s. Roots Pharma House (P) Ltd., Chennai, M/s. Satven & Mer, Chennai, M/s. Tickle Pharma, Chennai, M/s. Shyulu India, Krishnagiri and M/s. ARK Medicare, Chennai. The goods manufactured by the assessee on its own account bear its own brand name and goods manufactured by the third parties bear the brand names....
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....ation with effect from May 01, 1995 claiming 15% central excise duty on branded goods and full exemption for its own products on the ground that it was eligible for exemption as per Notification No. 1/9-C.E., dated February 28, 1993, being an SSI Unit. The excise duty was paid on branded goods which were manufactured for third parties. However, in respect of inputs used in the manufacture of these goods, the assessee availed MODVAT credit. Three show cause notices were issued to the assessee stating that since it had filed MODVAT facility for branded goods under Notification No. 1/93-C.E., the assessee was not entitled to the benefit of exemption notification even in respect of its own products. Order-in-Original dated July 10, 1998 was passed confirming the demand. In the appeal filed by the assessee to the Commissioner (Appeals), the assessee succeeded as the said appeal was allowed by orders dated March 25, 2003 setting aside the Order-in-Original and holding that the assessee could avail both the facilities, i.e., MODVAT credit of inputs used for manufacturing of goods with brand name of others of exemption for own branded goods, simultaneously. This order was challenged by the....
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....oods gives a declaration that the specified goods shall be used as mentioned above; (ii) in any other case, the procedure set out in Chapter X of the Said Rules is followed: Provided further that nothing contained in this paragraph shall be applicable to the specified goods bearing a brand name or trade name (registered or not) of the Khadi and Village Industries Commission or of the State Khadi and Village Industries Board, National Small Industries Corporation or the State Small Industries Development Corporation. * * * * Notwithstanding the exemption contained in paragraph 1 of this notification, a manufacturer shall have an option for not availing of the benefit of the exemption contained in the said paragraph and to pay duty of excise at the rate applicable to the specified goods but for the exemption contained in the said paragraph 1, subject to the condition that such manufacturer shall pay duty at the rate applicable but for the aforesaid exemption on all subsequent clearances of specified goods made after availing such option, in a financial year in which such date of option falls." 8) This Notification contained as many as 11 explana....
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....hich we are concerned in these appeals are noted below: "2. The exemption contained in this notification shall apply subject to the following conditions, namely:- (i) a manufacturer who intends to avail the exemption under this notification shall exercise his option in writing for availing the exemption under this notification before effecting the first clearances under this notification and such option shall be effective from the date of exercise of the option. Such option shall not be withdrawn during the remaining part of the financial year except when an option is exercised with respect to Notification No. 9/99-C.E., dated 28th February, 1999. (ii) a manufacturer also has the option not to avail the exemption contained in this notification and instead pay the normal rate of duty on the goods cleared by him. Such option shall be exercised before effecting his first clearances at the normal rate of duty. Such option shall not be withdrawn during the remaining part of the financial year. (iii) while exercising the option under condition (i), the manufacturer shall inform in writing to the Assistant Commissioner of Central Excise or the Deputy Co....
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.... shall not apply to specified goods bearing a brand name or trade name, whether registered or not, of another person, except in the following cases:- (a) where the specified goods, being in the nature of components or parts of any machinery or equipment or appliances, are cleared for use as original equipment in the manufacture of the said machinery or equipment or appliances by following the procedure laid down in Chapter X of the Central Excise Rules, 1994. Provided that manufacturers, whose aggregate value of clearances for home consumption of such specified goods for use as original equipment does not exceed rupees fifty lakhs in a financial year as calculated in the manner specified in the said Table, may submit a declaration regarding such use instead of following the procedure laid down in Chapter X of the said rules; (b) where the specified goods bear a brand name or trade name of- (i) the Khadi and Village Industries Commission; or (ii) a State Khadi and Village Industry Board; or (iii) the National Small Industries Corporation; or (iv) a State Small Industries Development Corporation; or (v) a State S....
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....specified goods produced; (e) date from which option under this notification has been exercised; (f) aggregate value of clearances of specified goods (excluding the value of clearances referred to in paragraph 3 of this notification) till the date of exercising the option; (iii) the manufacturer shall not avail the credit of duty on inputs under rule 3 or rule 11 of the CENVAT Credit Rules, 2002 (herein after referred to as the said rules), paid on inputs used in the manufacture of the specified goods cleared for home consumption, the aggregate value of first clearances of which, as calculated in the manner specified in the said Table does not exceed rupees one hundred lakhs; (iv) the manufacturer also does not utilise the credit of duty on capital goods under rule 3 or rule 11 of the said rules, paid on capital goods, for payment of duty, if any, on the aforesaid clearances, the aggregate value of first clearances of which does not exceed rupees one hundred lakhs, as calculated in the manner specified in the said Table; (v) where a manufacturer clears the specified goods from one or more factories, the exemption in his case shall apply ....
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....2001: (b) where the specified goods bear a brand name or trade name of- (i) the Khadi and Village Industries Commission; or (ii) a State Khadi and Village Industry Board; or (iii) the National Small Industries Corporation; or (iv) a State Small Industries Development Corporation; or (v) a State Small Industries Corporation; (c) where the specified goods are manufactured in a factory located in a rural area." 13) Having taken note of the relevant provisions of the aforesaid exemption Notifications and without commenting upon the same at this juncture, we would like to discuss few judgments of this Court which have considered and interpreted these Notifications in the context of the issue that arises for determination in these appeals. In Commissioner of Central Excise, Ahmedabad v. Ramesh Food Products 2004 (174) E.L.T. 310 (S.C.) , the assessee therein was engaged in the manufacture of biscuits under the brand name 'Ramesh' on his own account. It was also manufacturing, on job work basis, biscuits under the brand name of 'Cadbury' on behalf of M/s. Hindustan Coco Products, Bombay. It availed ....
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....the following: (a) The decision of the Tribunal in that case was of the year 1998 and it had relied upon its earlier judgment in Faridabad Tools case, which was decided in the year 1993, without realising that the said judgment had been overruled by a larger Bench of the Tribunal in Kamani Foods case, decided in the year 1995. (b) In view of the above, this Court was influenced by the fact that smaller Bench of the Tribunal, while giving the decision which was impugned before it, was bound to follow the judgment of the larger Bench as per the demands of judicial propriety. (c) In Kamani Foods case, the larger Bench of the Tribunal had noted its earlier Special Bench ruling in the case of Kharia Cement Works v. Collector of Central Excise 1989 (42) ELT 696 (Tribunal) wherein it was held that Notification No. 175 of 1986 had to be read as a whole and sub-clauses (i) and (ii) had to be construed harmoniously. The case was, thus, confined to interplay between sub-clauses (i) and (ii) of clause (a) of para 1 of the Notification, which reads as under: "In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, in supersession of the....
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....istinction between the goods cleared for home consumption and those manufactured on job work basis for third parties and the fact that CENVAT credit was availed of only in respect of goods manufactured for third parties and not with respect to home brand was not brought to the notice of the Court. Other provisions of the notifications which have bearing on this issue were also not brought to the notice of the Court. In fact, as noted above, the Court was primarily influenced by the fact that Tribunal had relied upon its earlier decision in Faridabad Tools case without realising that same had already been overruled by a larger Bench of the Tribunal in Kamani Foods case. It would be pertinent to point out that the appeal was decided ex parte, i.e., in the absence of assessee who chose not to appear. As would be noted hereafter on this issue, it is the other clauses of the Notifications which provide a correct answer. 16) The question posed in these appeals, however, is different where the assessees have not claimed any CENVAT/MODVAT credit in respect of inputs used in the manufacture of their own products. This CENVAT credit is availed by them in respect of goods manufactured for ....
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....actory for use as original equipment in the manufacture of the said machinery or equipment or appliances and the procedure set out in Chapter X of the said rules is followed... Provided further that nothing contained in this paragraph shall be applicable to the specified goods where a manufacturer affixes the specified goods with a brand name or trade name (registered or not) of the Khadi and Village Industries Commission, the State Khadi and Village Industries Board, the National Small Industries Corporation or the State Small Industries Development Corporation. Para 4 The exemption contained in this notification shall not apply to the specified goods bearing a brand name or trade name, whether registered or not, of another person, except in the following cases:- (a) where such specified goods, being in the nature of components or parts of any machinery or equipment or appliances, are cleared for use as original equipment in the manufacture of the said machinery or equipment or appliances by following the procedure laid down in Chapter X of the Central Excise Rules, 1944. Provided that manufacturers, whose aggregate value of clearances for home consumption of such specified ....
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...., the clearances for home consumption only are to be taken into consideration, except in those cases where it is clearly provided otherwise. For this purpose, clearances bearing the brand name or trade name of third parties are concerned, they are kept outside the scheme inasmuch as: (a) they are not to be included for the purposes of determining the aggregate value of the clearances for home consumption; and (b) such products bearing brand names or trade names of third parties, even if manufactured by the SSI Unit, are not eligible for any exemption and excise duty thereupon has to be paid. Once we understand the scheme of the Notifications in the aforesaid perspective, which according to us is the only manner in which it has to be understood, it becomes apparent that so far as manufacture of branded goods of third party on job work basis by the SSI Unit is concerned, they are to be dealt with differently in the sense that they do not come within the ambit of exemption on which normally excise duty, as per the provisions of the Act, is payable. As a sequitur, it also follows that once excise duty is paid by the manufacturer on such branded goods manufactured, the brand name whereo....
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....mesh Food Products case decided by the Hon'ble Supreme Court. In that case, the Honourable Supreme Court considered the options available to the SSI units clearing specified goods and decided that both the options provided substantive concessions viz; modvat and exemption under Notfn. 175/86 to the manufacturer and the manufacturer had to decide on one option. Once an option was made, there was no liberty to the assessee to avail benefits of both the options simultaneously. Therefore an SSI unit availing full exemption as per the Notfn. No. 175/86 in respect of certain specified goods could not also avail the modvat benefit in respect of certain other specified goods. 8.1 Notfn No. 175/86 dated 01.03.1986 extended concessional rate of duty on first clearances of specified goods of value of rupees seven and half lakhs while availing modvat credit on inputs or full exemptions benefit for such goods without the benefit of modvat credit. The Notfn also provided lesser benefit for further clearances in excess of the above aggregate value under both the options for higher slabs/aggregate value of clearances. In computing the aggregate value of clearances for the purposes of ....