TaxTMI 
TaxTMI 
2024 (9) TMI 307
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....le Electronics Ltd., are manufacturers of Populated Printed Circuit Boards (PPCB) classifiable under Chapter Heading 8517 7010 of Central Excise Tariff Act (CETA), 1985. Since, the process of stuffing and soldering of components on the Printer Circuit Boards (PCB) supplied by the customers amounted to manufacture under Section 2(f) of the Central Excise Act (CEA), 1944, the appellant was liable to pay duty on the same. Therefore, the Commissioner in the impugned orders invoking the extended period of limitation confirmed duty demand along with applicable interest. He also imposed equivalent penalty under Section 11AC of the Central Excise Act, 1944 along with penalty under Rule 25 and 26 of the Central Excise Rules 2002. Aggrieved by this orders, the appellant is in appeal before us. 3. The learned counsel on behalf of the appellant has made the following submissions: The Appellants had taken over M/s. Design & Assemblies Inc. which was a partnership firm which was undertaking job work of assembling components such as capacitors, resistors, inductors, transistors, diodes, chips, integrated circuits on to printed circuit board (PCB) supplied by following customers, namely: ....
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....3/94-CE dated 11.4.1994 cannot be denied to the Appellants, if the suppliers had not filed declaration and followed the procedure as laid down under the Notifications. Reliance was placed on the Hon'ble Tribunal Judgements in the case of Salem Weld Mesh Vs. Commissioner of Central Excise, Salem reported in 2007 (218) E.L.T 401 (Tri. Chennai) and in the case of Bharat Foundry Vs. Commissioner of Central Excise Ahmedabad - II reported in 2009 (246) E.L.T 561(Tri. Ahmd). (ii) That demand for the period prior to 07.03.2012 is clearly time barred, as the Audit Party in Letter dated 05.10.2009 had sought details and was satisfied. (iii) Without prejudice, Appellants submitted that in respect of 100% EOU, STPI units, Govt. and Defence supplies and those suppliers under Rule 4 of the Cenvat Credit Rules, 2004 are otherwise exempted. The Appellants gave details category wise and stated that the worst case against them would be demand of Rs.5,87,685/-." 3.3 The learned counsel further stated that as per Notification No.36/2001-CE(NT) dated 26.6.2001, the Principal Manufacturer is exempted from registration under Rule 9 of Central Excise Rules if he authorises the job wor....
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.... job work. (i) goods supplied to Defence, (ii) that they are 100% EHTP, (iii) that the job work permission was obtained from jurisdiction range, (iv) that the finished goods are cleared on payment of duty, (v) that the job worker received goods are used in the manufacture excisable goods which are exempted under Notification No.6/2006-CE dated1.3.2006 (vi) that they have sent inputs under Rule 4(5)(a) of CCR, 2004. 3.6 During investigation, the suppliers informed that either they are exempted from payment of Excise duty or are paying duty on final products manufactured out of job worked goods. For instance, a letter from ASTRA Microwave Products Ltd. confirmed that all the goods manufactured by them are excisable goods only and they are sending raw material/inputs to the Appellants; letter from Precimeasure Controls Pvt. Ltd. to the Commissioner also declared that the PCBs assembled in their main temperature controllers (final product) were sold on payment of Central Excise duty; and letter from B. S. Industries declared that they are below Excise duty exemption limit. Thus, the suppliers were availing exemption or paying exc....
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....res of Notification No.22/2003-CE. Further, the Appellants had given sample challans indicating movements of raw materials under Rule 4 of Central Excise Rules, 2004, Notification No.10/1997-CE dated 1.3.1997 supplied to research institutions or a university or an Indian Institute of Technology or Indian Institute of Science, Bangalore. Notification No.70/1992-CE dated 17.6.1992 granted exemption to goods manufactured in a factory as a job work and used in undertaking specified in the table for manufacturer of goods for supply to ministry of Defence, the specified undertaking is M/s. Bharat Electronics Ltd. and Others. Sections 26 of SEZ Act, 2006 clearly provided the exemption without any condition. Therefore, the observations made by learned Commissioner are without any basis in disregarding alternative submissions. 3.10 The learned Commissioner has erred in invoking extended period when the issue involved interpretation of duty liability and there are decisions holding that even if suppliers have not filed declaration, the job worker is eligible for exemption and further, the Audit on 5.10.2009 had enquired on this point and were satisfied that no duty was payable by the job ....
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....ished in the following judgements: (i) Commissioner of C. Ex Mumbai - II vs. Indian Oil Tanking Pvt. Ltd.: 2017 (6) G. S. T. L. 417 (Tri- Mumbai) where it is held that the decision in the case of Hari Chand Shri Gopal was in the context of taxability of products and application of rate of tax, the condition was specific, the objective of Notification is unambiguously clear and could be met only by strict compliance. (ii) Forging Machinery Manufacturing Co. vs. C. C. E. & S. T., Jalandhar: 2018 (364) E. L. T. 208 (Tri Chan.) wherein it was held that Chapter X is an elaborate procedure required to establish beyond doubt that the goods manufactured and cleared by NSSC stands reached in the factory of recipient and the stands further used by recipient in the manufacture of their product. The ratio of the above decision cannot be adopted and applied in the present case where the assessee has not filed the declaration intending to avail benefit of excisable Notification especially when such Notification and option stands intimated to the Revenue in the Form of AR 3 returns, In the present case also by sending goods in Annexure - II mentioning the Notification no. 214/ 8....
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....uty, which has been compiled. Therefore, ratio of the judgment in the case of Sonex Marble is not relevant. (ii) The Hon. Apex Court Judgment in the case of CC. vs. Dilip Kumar & Company - 2018 (361) ELT 577 (SC) with regard to import of vitamin E50 powder benefit of Notification No. 20/1999 was denied as the goods under import contained chemical supplements for animal feed and not animal feed or prawn feed. The supreme court observed that the purpose of interpretation is essentially to know the interpretation of legislative and mandatory requirements of exemption clause should be interpreted strictly and the directory conditions of such Exemption Notification can be condoned if there is a substantial compliance with the main requirements. The core issue was that in the event of ambiguity in an Exemption Notification, the benefit of such ambiguity go to the subject/assessee. The Hon'ble Supreme Court stated that they are only concerned in this case with a situation where there is ambiguity in an exemption Notification. Therefore, it is submitted that in the present case there is no ambiguity in the Notification and the issue involved in these appeals is whether Appellants ....
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....arly, other judgments in the Revenue compilation are on different facts and Appellants case is squarely covered on facts and same Notification in the case of Innar Profiles at pages 316-319 in the first Appeal. In a recent judgment, in the case of M/s Saravane Colour Match Works v/s Commissioner, GST and Central Excise, Tiruneveli - 2024(3) TMI 1225- CESTAT - Chennai , Hon'ble Tribunal held Department found delivery challans which evidences that the goods were being sent to the principal manufacture and therefore, merely because the procedure adopted for job work as per Notification No. 214/86 CE is not followed, the Department cannot demand duty from the job worker. 4. The Authorised Representative on behalf of the Revenue has submitted that the appellant, M/s, Smile Electronics Ltd., are engaged in the activity of manufacture and clearance of Populated Printed Circuit Boards (PPCB) falling under Chapter sub-heading 8517 7010 of the schedule to the CETA. During the course of audit verification, it was noticed that the appellants were manufacturing PPCBs by populating the Printed Circuit Boards (PCBs) and that the inputs required for manufacture of PPCBs were either procured by ....
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....o a fact that the above fact is not denied by the appellants themselves in as much as they carry out the same process to manufacture PPCBs on their own account and are removed/invoiced by them to their customers. Therefore, the process viz., stuffing, soldering of the components carried out by them on the plain PCBs supplied by their customers on job work basis amounts to manufacture in terms of Section 2(f) of CEA. 4.1 The fact that the appellant undertook conversion of bare PCB into PPCB and collected job charges at mutually agreed rates based on the complexity of the job and the volume of the job, etc. is not disputed. M/s. Design & Assemblies Inc. a division of the appellant is exclusively engaged in undertaking of assembly of components on PCBs supplied by customers on collection of job charges. On verification of records, it was revealed that the activities undertaken in the name and style of M/s .Design & Assemblies Inc. are accounted in the appellant's name and the procurement of consumables required for the job and other requirements by M/s. Design & Assemblies Inc. are made through the appellant. The goods cleared on payment of duty are under the invoices of appellant ....
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.... is only on the manufacturer. The duty liability can be shifted to the supplier of raw materials or semi-finished goods only if the supplier gives an undertaking in terms of the notification. We cannot accept the learned counsel's argument that this is a procedural lapse. We are of the opinion that this is a substantial condition which cannot be taken as a procedural condition, as it shifts the duty liability from the job worker to the supplier of raw materials or semi-finished goods. Until and unless this condition of giving undertaking is fulfilled, the duty cannot be fastened on the supplier of raw materials or semi-finished goods, as they were not the manufacturers of marble slabs/tiles. We note there are several case laws that have held that the condition of the exemption notification has to be construed strictly and if any condition is not fulfilled the same cannot be applied to a situation." b) It is submitted that the appellants have not fulfilled the conditions of the Notification No.214/86 CE as amended or the conditions of Notification 36/2001 CE (NT). No declaration has been filed by the supplier of raw materials with the jurisdictional Assistant/ Deputy Commis....
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.... shall be used in or in relation to the manufacture of the final products. In the present matter no evidence has been brought on record by the appellants to prove that the supplier of the raw material had supplied raw material to them under the provisions of Notification No. 214/86. On query being made by the bench, the ld. Advocate could not also show any documents on the basis of which the Appellants presumed that they were working under Notification 214/86. As the conditions specified in the notification have not been complied with, the benefit of notification is not available to the goods manufactured by them. For the same reason the decision in the cases of Rubicon and Sonic Band International referred to by the ld. Advocate are not applicable. The similar views were expressed by the Tribunal in Desh Rolling Mills case, supra, wherein it was held that "Notification No. 214/86 nowhere provides that the supplier of the raw material will be liable to pay the duty on the goods manufactured as a Job Work." d) The Hon'ble High Court of Gujarat in the case of Apex Electricals Pvt. Ltd. vs. Union of India 1992(61) ELT 413 (Guj) has held that the job workers were no dummies of....
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....ers. Accordingly, mere receipt of goods under relevant challans will not make them eligible for exemption without following / complying with the conditions stipulated therein. 4.5. It is submitted by the Department that the provisions of Cenvat Credit Rules deal with the eligibility, availability and nature of cenvat credit that are allowed to an assessee and does not specify anything with regard to the valuation of the goods cleared under the said rules nor exempts any goods. The Hon'ble Larger Bench of the CESTAT in the case of Thermax Babcock & Wilcox Ltd vs CCE Pune-I {2018(364) ELT 945[Tri.-LB]} after perusing the provisions of Rule 4(5) of CCE has held that "Perusal of the above sub-rules reveal that Rule 4(5)(a) is concerned only with permitting removal of inputs to the job worker by the principal manufacturer who has availed Cenvat credit on such inputs. Pertinently, Rule 4 of the Cenvat Credit Rules is concerned with the conditions under which a manufacturer is allowed to avail cenvat credit. Rule 4(5)(a), 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 with....
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....d inconvenience cannot be the basis to alter the meaning to the language employed by the legislation especially in fiscal statutes and penal statutes." Similar decisions have been passed in the following cases, which are relied upon by the Department. i. 2010(260) ELT 3[S.C.] - Hari Chand Shri Gopal ii. 2022(58) GSTL 129[S.C.] - Krishi Upaj Mandi Samiti iii. 2015(324) ELT 646[S.C.] - Larsen & Toubro Ltd. iv. 2015(325) ELT 417[S.C.] - Meridian Industries Ltd. v. 2015(319) ELT 556[S.C.] - B.P.L. Ltd. vi. 2011(265) ELT 14[S.C.] - Uttam Industries. 4.8 The appellant contended that the suppliers of raw materials are either 100% EOU/STPI/SEZ units; customers availing SSI or customers who supply to Defence and hence, the job-worked goods are exempted, therefore, they are not liable for payment of duty. They claimed that mere non-filing of declaration by supplier is only a procedural and technical lapse and the same cannot be a reason for denial of exemptions and demand of duty is not sustainable. Referring to the above submissions the Adjudicating Authority held that they are not eligible for the exemption of the said Notifications ....
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.... E/20699/2019 16/03/2017 09.11.2017 Oct. 2015 to Mar.2017 01/2019 dt. 11.01.2019 6,76,07,235 5.1 The main issues to be decided are as follows: i) Whether the processes undertaken by the appellant on job work basis amounted to manufacture under Section 2(f) of the Central Excise Act, 1944. ii) Whether the duty liability is on the appellant who is a job-worker or the suppliers of raw materials. iii) Whether proviso to Section 11A can be invoked. 5.2 Section 2(f) of Central Excise Act 1944 reads as: (f) "manufacture" includes any process, - i. incidental or ancillary to the completion of a manufactured product; ii. which is specified in relation to any goods in the Section or Chapter notes of ^5[the Fourth Schedule] as amounting to ^6 [manufacture; or] iii. which, in relation to the goods specified in Third Schedule involves packing or re-packing of such goods in a unit container or labeling or re-labeling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consu....
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.... being, i.e., there must now emerge an article which has a distinctive name, character or use. (ii) The judgment also explains the circumstances when transformation does not take place: Examples are given when character and use remains the same or when foreign matter is removed from an article or additions are made to the article to preserve it or increase its shelf life or when no change occurs in the name, character or use of the product. (iii) It was noted that when essential character of the product does not undergo change there would be no manufacture. The Court explained 'retaining of essential character test' to mean that the product in its primary and essential character remains the same even after the process in-question and the product is sold in the market with its earlier character. Following passage from Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Pio Food Packers 1980 (6) E.L.T. 343 (SC), was quoted which drew a line between cases in which essential character had changed and those in which no such change had taken place. "19. Interestingly, a line was drawn between cases in which the essent....
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....unt to manufacture or not, the Court culled out four categories of cases in its conclusion in para 27 of the judgment. We reproduce these categories hereunder: "27. The case law discussed above falls into four neat categories. (1) Where the goods remain exactly the same even after a particular process, there is obviously no manufacture involved. Processes which remove foreign matter from goods complete in themselves and/or processes which clean goods that are complete in themselves fall within this category. (2) Where the goods remain essentially the same after the particular process, again there can be no manufacture. This is for the reason that the original article continues as such despite the said process and the changes brought about by the said process. (3) Where the goods are transformed into something different and/or new after a particular process, but the said goods are not marketable. Examples within this group are the Brakes India case and cases where the transformation of goods having a shelf life which is of extremely small duration. In these cases also no manufacture of goods takes place. (4) Where the goods are transforme....
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....whether there was a single process or several processes." 11. The ratio thereof is explained in paragraph 24 in the following words: "24. It is important to understand the correct ratio of the judgment in the J.G. Glass case. This judgment does not hold that merely by application of the second test without more manufacture comes into being. The Court was at pains to point out that a twofold test had emerged for deciding whether the process is that of manufacture. The first test is extremely important - that by a process, a different commercial commodity must come into existence as a result of the identity of the original commodity ceasing to exist. The second test, namely that the commodity which was already in existence will serve no purpose but for a certain process must be understood in its true perspective. It is only when a different and/or finished product comes into existence as a result of a process which makes the said product commercially usable that the second test laid down in the judgment leads to manufacture....." 12. This Court emphasised that there has first to be a transformation in the original article and this transformation should brin....
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....referred to as the said goods) manufactured in a factory as a job work and used in or in relation to the manufacture of final products (on which duty of excise is leviable whether in whole or in part) specified in column (3) of the said Table, 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). Explanation. -For the purposes of this notification, the expression "job work" means processing or working upon of raw materials or semi-finished goods supplied to the job worker, so as to complete a part or whole of the process resulting in the manufacture or finishing of an article or any operation which is essential for the aforesaid process. 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 avails of the credit of duty paid on inputs under rule 57A of the said Rules, and gives an undertaking to the Assistant Collector of Central Excise having jurisdiction over the factory of the job worker that the said goods will be used in or in relation to the man....
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....h are exempted from the whole of the duty of excise leviable thereon under the aforesaid notification; and (b) that in the event of his failure to do so, he undertakes to pay excise duty, if any, payable on such goods, but for the exemption contained in this notification, as if such goods were manufactured by the said supplier and sold on his own account: Provided that the waste or bye-product, if any, generated during the process of such job work shall also be exempt from the whole of the duty of excise leviable thereon under the said Schedule if - (i) such waste or bye-product is used by the job worker for the manufacture of the said specified goods within his factory; or (ii) returned to the said supplier and are used in the factory of the said supplier in or in relation to the manufacture of the specified goods. Explanation. - For the purposes of this notification, the expression "job work" means processing of or working upon raw materials or semi-finished goods supplied to the job worker, so as to complete a part or whole of the process resulting in the manufacture or finishing of an article or any operation which is essential for t....
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....se of the Supreme Court of India Commissioner of Cus. (Import), Mumbai Versus Dilip Kumar & Company 2018 (361) E.L.T. 577 (S.C.) held that: "(1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. (2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue." 6.3 In view of the above, since the conditions laid down in the above Notifications are substantive in nature which have not been complied with the question of extending the benefit of the same is ruled out. The reliance placed by the appellant on Suvikram Plastex (P) Ltd. (supra) is also not relevant because the Tribunal therein had observed that "the raw materials have been sent to the appellant on Delivery Challan and the appellants have stressed that even from 1999 onwards they have been regularly filing the declarations required for availing the benefit of SSI Notification". However....
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....r 100% EOU or STPI Units who were eligible for the benefit of Notification No.22/2003 dated 31.03.2003. It was also submitted that some of the suppliers were availing SSI Notification and hence, not liable to duty. Further, clearances were also made to SEZ Unit or Defence Unit where liability does not arise; hence, there was no question of payment of duty. The appellant has also placed on record detailed differential duty calculation category-wise which was placed before the authorities vide their reply dated 30.08.2014. The appellant has also admitted duty liability of Rs.24,95,797/- in first appeal and Rs.17,90,736/- in the second appeal. 9. The appellant further submits that investigations were conducted on the suppliers of the raw materials also and the suppliers vide various letters have in turn communicated to the department that ultimately the goods were not liable to duty because either they were 100% EOU, or supplied the goods for the purpose of defence or they were enjoying the benefit of SSI notification or have cleared the same on payment of duty. None of these documents which were placed on record were not considered by the Commissioner in the impugned order. For in....