TaxTMI 
TaxTMI 
2016 (4) TMI 187
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.... and cleared under Notification No. 214/86 on the ground that the goods so manufactured on jobwork basis is exempted from payment of excise duty therefore in terms of Rule 6 of Cenvat Credit Rules, 2004 the appellant is liable to pay 10% of the value of exempted goods and consequently whether the appellant is liable to pay 10% of the value of such exempted goods in terms of Rule 6 of Cenvat Credit Rules, 2002. 3. Ms. Anjali Hirawat, learned Counsel for the appellant submits that the appellant received the raw material from the principal supplier under Rule 4(5)(a) of the Cenvat Credit Rules, 2002 without payment of duty on the said raw material manufacturing is carried out. During the manufacturing they utilized propane gas on which they were availing CENVAT credit. She further submits that the adjudicating authority demanded 10% of the value of the goods manufactured on jobwork basis on the ground that such jobwork goods is exempted under Notification No. 214/86. It is her submission that as per the said exemption the principal manufacturer undertakes to discharge the excise duty on their final product wherein the intermediary goods manufactured by the appellant are used. In such....
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....to exempt any excise duty. Since the goods manufactured on jobwork basis is exempted on the ground that the excise duty is charged on the full value of final product wherein the value of jobwork goods deemed to have been included the jobwork goods is not exempted. Therefore, Rule 6(3)(b) which is applicable only on the clearance of exempted goods shall not apply in the case of the goods manufactured on jobwork basis under Notification 214/86. The relevant paras of the judgements relied on by the learned Counsel are reproduced below:- (a) Hwashin Automotive India Pvt. Ltd. "8. In Mahindra & Mahindra Ltd. (supra), the Tribunal observed that the amount paid in terms of Rule 6(3)(b) of CCR was for the adjustment of credit of inputs which went into the manufacture of exempted goods. This amount was collected towards the inadmissible credit availed by an assessee using common inputs and clearing also the exempted final product. As the appellants were eligible for the input credit relatable to job worked goods cleared to the principal manufacturer, they were not required to pay any amount in terms of Rule 6 (3)(b) of CCR, 2002. This position was clarified by the following obser....
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....y the respondent on job work basis under Rule 4(5)(a) of Cenvat Credit Rules cannot be treated exempted goods and the recovery of the amount under Rule 6(3) of Cenvat Credit Rules is not sustainable. It is seen that the Tribunal in the case of Shree Rayalaseema Dutch Kassenbown Ltd. v. CCE, Tirupathi - 2006 (76) RLT 464 (CESTAT- Bombay) held that demand of duty on job worker working under Rule 4(5)(a) for the reason that raw material supplier has not followed the provision of Notification No. 214/86-CE, is not correct. Hence, the contention of the Revenue, in the present case, that the procedure under Notification No. 214/86-CE were not followed, has no merit. 7. We find that the Larger Bench of the Tribunal in the case of Sterlite Industries (I) Ltd. v. Commissioner of Central Excise, Pune - 2005 (183) E.L.T. 353 (Tribunal-LB) following the decision of Hon'ble Supreme Court in the case of Escorts Ltd. v. CCE - 2004 (171) E.L.T. 145 (S.C.), held as under :- "By applying the ratio of the above decision, it becomes clear that 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....
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....uring the period of dispute and therefore, the ratio of the Tribunal's judgment in the case of Sterlite Inds. Ltd. would be applicable to this case also. In view of this, I do not find any infirmity in the impugned order. The Revenue's appeal is accordingly dismissed. The Cross Objection filed by the respondent also stands disposed of as above." (d) Sterlite Industries (I) Ltd. "3. We are also in agreement with the appellant's contention that Rule 57C debars taking of credit in respect of the inputs used in the manufacture of the final product, if final product is exempted from the whole of duty of excise leviable thereon or chargeable to nil rate of duty. As such, to attract the provisions of Rule 57C, two situations in respect of the final product should be satisfied. Either the final product should be exempted, which situation can arise only when there is an exemption notification issued under Section 5A of the Central Excise Act or the final product is chargeable to nil rate of duty. Expression chargeable to nil rate of duty or exempted from whole of duty was considered by the Tribunal in the case of Orissa Synthetics Ltd. v. Collector of Central Ex. [1995 (77) E.L.T....
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.... is to be seen that the whole purpose of the Notification and the Rules is to streamlines the process of payment of duty and to prevent the cascading effect if duty is levied both on the inputs and the finished goods. Rule 57D(2), which has been extracted hereinabove, shows that in the manufacture of a final product an intermediate product may also come into existence. Thus in cases where intermediate product may also come into existence. Thus in cases where intermediate product comes into existence, even though no duty has been chargeable to Nil rate of duty, credit would still be allowed so long as duty is paid on the final product. 9. In cases of manufacturers like the Appellants the final product is the tractor. The intermediate product would be parts which are manufactured for being used in the tractor. In such a case the parts would not be the final product. Thus Rule 57C would have no application. The mere fact that the parts are cleared from one factory of the Appellants to another factory of the Appellants would not disentitle the Appellant from claiming benefit of Notification No. 217/86-C.E., dated 2nd April, 1986. As stated above, the Notification itself clarifies tha....
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....ed both on the inputs and the finished goods. Rule 57-D(2), which has been extracted hereinabove, shows that in the manufacture of a final product an intermediate product may also come into existence. Thus in cases where an intermediate product comes into existence, even though no duty has been paid on the intermediate product as it is exempted from whole of the duty or is chargeable to nil rate of duty, credit would still be allowed so long as duty is paid on the final product. 9. In cases of manufacturers like the appellants, the final product is the tractor. The intermediate product would be parts which are manufactured for being used in the tractor. In such a case the parts would not be the final product. Thus Rule 57-C would have no application. The mere fact that the parts are cleared from one factory of the appellants to another factory of the appellants would not disentitle the appellants from claiming benefit of Notification No. 217/86-CE dated 2-4-1986. As stated above, the notification itself clarifies that the inputs can be used within the factory of production or in any other factory of the same manufacturer. 10. Mr Lakshmikumaran relied upon the decision of this C....