AI Drafter 
TaxTMI 
TaxTMI 
2017 (12) TMI 266
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....tion No.214/86-CE dated 25.3.1986 is not followed by the said job worker. Accordingly the referring Bench was of opinion that it has reason to differ with the decision of Tribunal in the case of Mukesh Industries Ltd. Vs. CCE, Ahmedabad - 2009 (248) ELT 203 (Tri.-Ahmd.) holding and Dhana Singh Synthetics Pvt. Ltd. Vs. CCE, Vapi - 2015 (326) ELT 699 (Tri-Ahmd.) holding that job worker following due procedure prescribed by Notification No.214/86-CE dated 25.3.1986 is exempted from levy of duty on intermediate manufactured by it when principal manufacturer discharges such duty. Accordingly, following question has been referred by the Division Bench for answer by the Larger Bench: "In the facts and circumstances of the present case, when the principal manufacturer (Babcock) clears the final product without payment of duty by availing exemption under a notification, whether the job-worker M/s Thermax, who manufactures intermediate parts of boiler on the inputs sent by Babcock under Rule 4(5)(a) and returns the same to the principal manufacturer M/s Babcock, is liable for payment of duty when Notification No. 214/86-CE is not available on the manufactured goods at the said job-w....
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....r being partially processed are sent to a job worker for further processing, testing, repair, re-conditioning or any other purpose, and it is established from the records, challans or memos or any other document produced by the assessee 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 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 manufacturer can take the CENVAT credit again when the inputs or capital goods are received back in his factory." 4.3 Placing Rule 4(5) of 2001 Rules and 2002 Rules, it is emphasized by the appellant that when law permits principal manufacturer to clear input to the job worker through records, challans and memos or any other document and take cenvat credit on such input, he is obliged to discharge the ultimate excise duty liability arising on intermediate goods manufactured by the job worker for it. 4.4 The sub-rule (6) of Rule 4 of the Cenvat Credi....
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....nd not by the job workers. Accordingly job worker is not eligible to avail credit in such cases." 4.6 Appellants further submission was that decision of the Tribunal in M. Tex case (supra) was consistently followed in the case of Essar Steel Ltd. Vs. CCE - 2016 (341) ELT 145 ( Tri.-Del.). In that case, Tribunal held that the earlier view under erstwhile Rule 57F on the subject under Central Excise Act, 1944 was more strict. But liberal position has been enacted in Rule 4(5)(a) of the Cenvat Credit Rules, 2001. Appellants further relied on the decision of Tribunal in the case of Vandana Dyeing Pvt. Ltd. vs. CCE 2014 (307) ELT 528 (Tri.-Mum.) to support its contention. It was emphasized by appellants that the view of the CBE&C exempting the job worker from duty liability can be appreciated from para 3.18 of its Manual (copy of which is available at page 49 of the compilation filed by appellant) and that reads as under: "3.18 In case the manufacturer wishes to clear the goods directly from the premises of the job worker, as per rule 4(6), the Commissioner having jurisdiction over the factory of manufacturer of final products can allow such clearance subject to conditions i....
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....f Section 5A of the Central Excise Act, 1944 has also made provision to give effect to the notifications issued under Rule 8 of Central Excise Rules, 1944. Therefore those notifications are deemed to have been issued under the provisions of Section 5A of Central Excise Act, 1944 have the same effect what that was under earlier Rule 8 of Central Excise Rules, 1944. Thus the effect of Notification 214/86-CE dated 25.3.1986 continued to be same even after supersession of the 1944 Rules. 5.2 Revenue further submits that when the 2001 Rules came into force, that has been made to be subject to Section 5A of the Central Excise Act, 1944. The 2001 Rules and 2002 Rules have been enacted under the Rule making power of the Government to deal with the law relating to duties and obligations of assessees under such Rules. Relying on para 4 and 5 of the decision of Tribunal in the case of Facit Asia Ltd. Vs. CCE - 1991 (54) ELT 347 (Tri.-Chennai), Revenue submitted that Rule 57F(2) was similar to Rule 4(5)(a) of 2001 Rules and the decision in Facit Asia (supra) case was followed in the case of CCE Vs. Bright Steel Mac Fabrics - 1997 (94) ELT A145 (SC). In Bright Steel case the job worked goods....
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....hana Singh Synthetics case (supra) was decided under Rule 57F(4) read with the CBE & C circular of 1997. When that matter went to Apex Court, Civil Appeal was dismissed. Revenue relied on the decision of Tribunal in the case of CCE, Surat Vs. Span Heat Transfer Equip. Mfrs. Pvt. Ltd. - 2001 (135) ELT 861 (Tri.-Mumbai), to submit that Notification No. 214/86-CE shall have application to all cases of the job worked goods and in terms of such notification, where the job worker does not pay duty on intermediate goods manufactured by it, supplier of the input pays duty thereon. According to Revenue, the decision of Tribunal in Jinabakul Forge Pvt. Ltd. Vs. CCE, Belgaum - 1997 (93) ELT 373 (Tri.-Chennai) is also in this direction. 5.5 Revenue further relied on para 47 of the decision of Apex Court in Empire Industries Ltd. Vs. UOI - 1985 (20) ELT 179 (SC), to submit that neither hardship nor loss of benefit is criteria in fiscal statutes. Therefore neither 2001 Rules nor 2002 Rules can be interpreted by appellants to misconceive that if duty is demanded from a job worker for not following requirement of Notification No.214/86-CE dated 25.03.1986 that shall cause hardship to the job wo....
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....ine Centre Pvt. Ltd. Vs. CCE, Pune - 2004 (174) ELT 417 (SC) which read as under: "9. Modvat is basically a duty-collecting procedure, which aims at allowing relief to a manufacturer on the duty element borne by him in respect of the inputs used by him. It was introduced w.e.f. 1-3-1986. The said scheme was regulated under rules 57A to 57J of Central Excise Rules, 1944. Rule 57A entitled a manufacturer to take instant credit of the central excise duty paid on the inputs used by him in the manufacture of the finished product, provided that the input and the finished product were excisable commodities and fell under any of the specified chapters in the tariff schedule. Under rule 57G, every manufacturer was required to file a declaration before the jurisdictional Assistant Collector, declaring his intention to take Modvat credit after paying duty on the inputs. The object behind rule 57A read with rule 57G and rule 57-I was utilization of credit allowed towards payment of duty on any of the final products in relation to manufacture of which such inputs were intended to be used in accordance with the declaration under rule 57G. Rule 57-I referred to consequences of taking cre....
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....e dispute. Relying on para 34 of the judgment in the case of Ujagar Printes (supra), Revenue explains that no courts should look into the hardship or loss of benefit of a tax payer while dealing with the provisions of the statute since exemption is an exception and taxing is a Rule. Burden of proof to claim an exemption is required to be discharged by the claimant thereof. Strict construction of exemption provisions is the Rule of law. Apex Court reminds that taxation is Rule and the benefit and exemption are exceptions. Therefore to claim exemption from the scope of the levy, the claimant thereof has to prove that condition of law is satisfied. 5.12 Revenue relied on the decision of Tribunal in the case of International Engg. & Mfg. Services Pvt. Ltd. Vs. CCE, Jaipur - 2001 (135) ELT 551 (Tri.-Delhi), to submit that job worker is liable to duty in on the job working done since incidence of levy arises on manufacture of job worked goods. To claim benefit of exemption of duty therefrom, it is necessary to satisfy the condition of Notification No.214/86-CE dated 25.03.1986 as has been held in that case and such decision upheld by the Hon'ble Supreme Court as reported in 2002 (....
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....al 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. 350 (Tri.)] and after taking note of the Ministries clarifications issued vide Circular No.10/75/CX. 6, it was held that clearance under goods under provision of 191BB for export without payment of duty would not get covered by the above expression. Reference was made to the advice received from the Ministry of Law dealt in the paragraph of 9 in the said decision. It was opined in the said letter of the Law Ministry that the term exempted has a definite connotation. The same as attributed to the notification issued by the Central Government. Similarly, the chargeable to nil rate of duty would refer to the tariff rate being nil and the goods cleared in terms of provision of Rule 199BB would not be covered by the said expression inasmuch as the same are not chargeable to nil rate. In the present....
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....a person who employs hired labour in the production or manufacturer of excisable goods, but also any person who engages in their production or manufacture on his own account; [Emphasis supplied] The definition of the manufacturer says that any person who is engaged in any of the activity specified in clause (i) to (iii) of Section 2(f) of the Act would be called as manufacturer. It is the manufacturer who under Central Excise Act and Rules is liable to pay duty unless otherwise exempted. The ownership of the goods is immaterial. Any person who undertakes the above activities being manufacturer, a jobworker engaged in any of the said activity is a manufacturer and is thus liable to pay duty on the goods manufactured by him unless otherwise exempted. 7.2 Exemption from payment of excise duty has been provided by Notification issued under Section 5A of the Central Excise Act. The relevant exmption Notification No. 214/ 86 CE dt 25.03.1986 as amended was subject matter of consideration in the adjudication. That was issued by the Government in terms of Rule 8 (1) of Central Excise Rules, 1944. By virtue of Section 5 A (4) the legislature has provided that the exemption provided un....
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....ch notification or order, as the case may be.] (3) An exemption under sub-section (1) or sub-section (2) in respect of any excisable goods from any part of the duty of excise leviable thereon (the duty of excise leviable thereon being hereinafter referred to as the statutory duty) may be granted by providing for the levy of a duty on such goods at a rate expressed in a form or method different from the form or method in which the statutory duty is leviable and any exemption granted in relation to any excisable goods in the manner provided in this sub-section shall have effect subject to the condition that the duty of excise chargeable on such goods shall in no case exceed the statutory duty. Explanation. Form or method, in relation to a rate of duty of excise means the basis, namely, valuation, weight, number, length, area, volume or other measure with reference to which the duty is leviable : [Emphasis supplied] (4) Every notification issued under sub-rule (1), and every order made under sub-rule (2), of rule 8 of the Central Excise Rules, 1944, and in force immediately before the commencement of the Customs and Central Excises Laws (Amendment) Act, 1988....
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....aw materials or semi-finished goods - (i) on payment of duty for home consumption (on which duty of excise is leviable whether in whole or in part); or (ii) without payment of duty under bond for export; or (iii) without payment of duty to a unit in a free trade zone or to a hundred per cent. export-oriented undertaking or to a unit in an Electronic Hardware Technology Park or Software Technology Parks or supplied to the United Nations or an international organisation for their official use or supplied to projects funded by them, on which exemption of duty is available under notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 108/95-Central Excises, dated the 28th August, 1995"]. From the whole of the duty of excise leviable thereon, which is specified in the schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (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 material or semi-finished goods gives an under-taking to the [Assistant Commissioner of Central Excise or Deputy Commissioner of ....
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....the said Act; (iii) fabrics of cotton or man-made fibres falling under heading No.58.01, 58.02, 58.06 (other than goods falling under sub-heading No. 5806.20), 60.01 or 60.02 (other than goods falling under sub-heading No. 6002.10) of the First Schedule to the said Act." In terms of the above notification, it transpires that it is only in respect of goods covered by Para (1) and Para (2) of the Notification, manufactured by the jobworker, are exempted only if the same are used by the Principal Manufacturer in relation to the manufacture of final products on which duty of excise is leviable or which are cleared as such from the factory of supplier of raw material or semi finished goods either without payment of duty under bond for export or on payment of duty for home consumption. Such exemption is applicable only to those goods in respect of which the supplier gives undertaking to the Assistant Commissioner of Central Excise having jurisdiction over the factory of job worker. The facts of the case under reference are entirely different from the situations envisaged by the Notification(supra) under which the job-worker is exempted from payment of duty on goods manufactured by ....
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.... not cast any liability of duty upon the principal manufacturer who has sent the inputs for job-work other than the condition that in case of non receipt of goods within the stipulated period he shall be liable to reverse the cenvat credit availed on such inputs. The rule is confined to the scope of cenvat credit but has no relation with manufacture, manufacturer and payment of duty on the manufactured goods. 7.5 Similarly Rule 4 (6) is concerned with the condition under which the finished goods, manufactured from the inputs on which cenvat credit has been availed, can be cleared by the Principal manufacturer from the premises of job worker on payment of duty or for export under Bond subject to approval of the jurisdictional Commissioner of the Principal manufacturer. This rule is applicable only when principal manufacturer discharges the excise duty on finished goods which is manufactured by the job worker. This Rule does not allow the job worker to remove finished goods without payment of duty. Such a situation arises in case where the cenvated inputs are sent for job-work and finished goods manufactured therefrom is cleared from the job-work premises. It is a facility to avoi....
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....pal manufacture has resulted into duty liability upon the jobworker. Moreover, it is admitted by the appellant (job worker) that the inputs were not sent by the principal manufacturer under Notification No.214/86-CE. If the contention of the Appellant is accepted it would lead to the situation where neither the Principal manufacturer nor the jobworker would pay duty, which has not been legislated. 7.9 The Appellant has relied upon the Tribunal's order in case of M/s M.Tex & D.K. Processors P. Ltd Vs. CCE, Jaipur - 2001 (136) ELT 73 (TRI DEL) to support their views. However the facts are entirely different as the Principal manufacturer was sending goods to the jobworker in that case under rule 57 F (4) which reads as under : "57F(4) -The inputs can also be removed as such or after they have been partially processed by the manufacturer of the final products to a place outside his factory under the cover of a challan specified in this behalf by the Central Board of Excise and Customs, for the purposes of test, repair, refining, re-conditioning or carrying out any other operation necessary for the manufacture of final products or for manufacture of intermediate products....
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.... pari materia to 57 F (4) of erstwhile Central Excise Rules, 1944. However in our considered view Rule 57F (4) provided for payment of duty by the Principal manufacturer whereas Rule 4 (5) (a) only provides sending of cenvat availed inputs for jobwork and return of same to the Principal manufacturer implying that the Principal Manufacturer shall pay duty on the same. Accordingly those judgments are of no help to the Appellant. 7.13 Even the Tribunals order in case of Dhana Singh Synthetics Pvt. Ltd. Vs. Commissioner, Vapi - 2015 (326) E.L.T. 609 (Tri. - Ahmd.), is to the effect that the goods were received under rule 57 F (4) which itself stipulates the payment of duty by the Principal manufacturer and therefore no duty payment was required to be made. Since the principal manufacturer was paying duty, the jobwork was exempted from duty. Even the Tribunal Order relied upon by the Appellant in case of ESSAR STEEL LTD. Vs. CCE, RAIPUR - 2016 (341) ELT 145 (TRI) also says that the jobworker is not liable to pay duty if the Principal manufacturer is paying duty on the jobwork on returned goods at the time of clearance as such from the factory of the Principal manufacture or at the ti....
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....r - Fabric received by job worker accompanied with Challans issued under Rule 57F(5) of erstwhile Central Excise Rules, 1944 corresponding to Rule 4(5)(a) of Cenvat Credit Rules, 2002/2004, which returned after processing to principal manufacturer under said Challans without payment of excise duty - Demand raised as processed fabric not exempt under Notification No. 214/86-C.E. - HELD : Inputs received under Central Excise Challans and not under Notification No. 214/86-C.E. - As per C.B.E. & C. Circular No. 306/22/97-CX, dated 30-3-1997 for job work undertaken in terms of Rule 57F(4) ibid, duty liability to be discharged by principal manufacturer and not by job worker - No dispute that principal manufacturer cleared finished goods on payment of duty - Case of revenue neutral as any payment of duty by job worker will enable principal manufacturer to avail Cenvat credit - Order passed by adjudicating authority dropping proceedings against job worker upheld - Impugned order set aside - Section 11A of Central Excise Act, 1944. [paras 2, 3]. The order of Tribunal in case of Mukesh Industries Vs Commissioner 2009 (248) ELT 203 (TRI), Vandana Dyeing Pvt. Ltd. Vs. CCE, Mumbai III - 2014....
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....case of Collector Vs. Bright Steel Mac Fabrics - 1994 (69) E.L.T. 276 (Tribunal) as upheld by the Hon'ble Apex Court in case of CCE Vs. Bright Steel Mac Fabrics - 1997 (94) ELT A145 SC, the Tribunal has rightly held that Rule 57F (2) does not envisage return of inputs after completion of processing resulting in a semi-finished goods or intermediate goods without payment of duty. 7.18 In case of Desh Rolling Mills Vs. CCE, Delhi - 2000 (122) ELT 481 (TRI) the Appellate Tribunal confirmed duty demand upon the jobworker as the jobwork activity was not undertaken in terms of Notification No.214/86 -CE. The Tribunal held as under : "Notification No. 214/86 provides exemption to the goods manufacture in a factory as a job work and used in or in relation to the manufacture of final product on which duty of excise is leviable whether in whole or in part subject to the condition that supplier of the raw materials gives an undertaking to the Assistant Collector of Central Excise, having jurisdiction over the factory of the job worker, that the goods shall be used in or in relation to the manufacture of the final products in his factory; the said supplier produces evidence tha....