TaxTMI 
TaxTMI 
TaxTMI 
2024 (9) TMI 307
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....opulated 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: i) 100% EOU or STPI units or SEZ units. ii) Du....
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....claration 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 worker to comply with all procedural formalities under the Central Excise Act, 1944. Thus, if the Principal Manu....
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....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 excise duty on the final products which has been confirmed during investigation and therefore, substantial compliance of the condition of Notification No.214/19....
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....d 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 worker. Therefore, the duty demand only for the normal period i.e.. 8.3.2012 to 2.3.2015 as the period covered in the notice is 1.2.2008 to 31.10.2012. 3.11 With regard penalty on the Managing Direct....
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....nd 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/ 86 C. Ex., suppliers have made clear their intention of availing Notification No. 214/86 C. Ex. (iii) Techfab India Industries Ltd. vs. Commissioner of C. Ex., Daman: 2016 (343) E.L.T. 418 (Tri.-Ahmd.), wherein the judg....
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....f 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 here complied conditions of Notification substantially and whether duty, if any payable, is paid by Principal Manufacturer and job worked goods are used. It is humbly submitted that ratio of this constitutional bench judgment is not applicable t....
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....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 themselves or supplied free of cost by their suppliers/customers. The PPCBs manufactured using raw materials/components such as PCBs, resistors, capacitors, integrate circuits, etc., procured on their own account were cleared on payment of duty, whereas, those PPCBs manufactured us....
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....rried 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 and those cleared without payment of duty are under the invoices of M/s. Design & Assemblies Inc. The goods cleared under the invoices of M/s. Design & Assemblies Inc. are produced at the factory of the appellant using their employees and plant & machinery. 4.2 After detailed invest....
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....is 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 Commissioner as recorded by the adjudicating authority in para 29.3 of the OIO. As decided by the Hon'ble Tribunal in the case of M/s. Desh rolling Mills: 2000 (122) ELT 481 held that: "Notification 214/86 provides exemption to the goods manufactured in a factory as job work and used in or in relation to manufac....
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....cate 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 M/s Apex Electricals and therefore the job workers were actual manufacturers and M/s Apex were not liable for payment of duty. e) The Hon'ble Tribunal in the case of M/s. AFL ltd. vs. CCE, Mumbai 2013 (295) E.L.T 211 Tri Mumbai has held that the job worker is the actual manufacturer. (para 12&14) f) The Larger bench of Hon'ble tri....
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....ecify 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 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." 4.6. With regard to the job work undertaken for EOU units and SEZ units, they claim that they receive the raw materials under An....
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.... 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 since the process undertaken by them amounted to manufacture, and failed to intimate the department of the process undertaken by them and no procedures were followed. 4.9 With regard to limitation, it is submitted that the appellant was clearing similar goods manufactured by them on payment of duty clearly admits that they were aware of the fact the process undertaken by them amounted to manufacture and that the goods m....
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....al 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 consumer, and the word "manufacturer" shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account; 5.3 The process of populating the PCBs by the appellant as a job worker is not in dispute. As long as there is transformation of a product into a new product marketable and commercially known comes into existence, manufacture takes place. In the instance case, there is no dispute that th....
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....d '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 essential character had changed and those in which no such change had taken place in the following terms: "5. A large number of cases has been placed before us by the parties, and in each of them the same principle has been applied: Does the processing of the original commodity bring into existence a commercially different and distinct article? Some of the cases where it was held by this Court that a different commercial article had come into existence include Anwarkhan Mehboob Co. v. The State of Bombay and Ors. (where raw tobacco was manufactured into bidi patti), A. Hajee Abdul Shukoor and Co. v. The State of ....
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.... 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 transformed into goods which are different and/or new after a particular process, such goods being marketable as such. It is in this category that manufacture of goods can be said to take place." 10. On the facts of the present case, it is to be determined as to whether the case would fall under category (2) or category (4). We have already taken note of printing process. A cursory look into the same may suggest, as held by the Tribunal, that GI paper is meant for wrapping and the use thereof did not undergo any change even after printing as the end use was still the same, namely, wrapping/packaging. However, a little deeper scrutiny into the facts would bring out a significant ....
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.... 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 bring out a distinctive or different use in the article, in order to cover the process under the definition of 'manufacture'." In the instance case, the above tests stand satisfied and the goods manufactured by the appellant amounts to manufacture. 6. The second issue to be decided is who is liable to pay duty? Whether the supplier of raw materials or the job-worker (appellant). It is the contention of the appellant that the duty liability is on the supplier of the raw materials who is the principal manufacturer as per Notification No.214/86-CE dated 25.03.1986 and No.83/1994-CE dated 11.04.1994. The Commissioner in the impugned order dated 30.04.2014 has observed that M/s. Design and Assemblies Inc....
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..... 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 manufacture of the final products; (ii) the said supplier produces evidence that the said goods have been so used; and (iii) the said supplier undertakes the responsibilities of discharging the liabilities in respect of Central Excise duty leviable on the finished products. THE TABLE Sl. No. Description of the said goods Description of final products (1) (2) (3) 1. Goods classifiable under any headings of Chapters 28, 29, 30, 32, 33, 34, 35, 36, 37, 38, 39, 40, 48, 70, 72, 73, 74, 75, 76, 78, 79, 80, 81, 82, 83, 84, 85, 86, 87, 88, 89, 90, 91, 92, 93, 94, 95 or 96 (other than those falling under Heading Nos. 36.03 or 37.05) of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986). Goods classifiable under any he....
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....rposes 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 the aforesaid process, and the expression "job worker" shall be construed accordingly. 6.1 As seen from the above Notifications, there are certain conditions to be satisfied by the supplier of the raw materials in order to avail the benefit of the Notifications. Admittedly, none of these conditions have been satisfied and therefore, the Commissioner considering the clearances made were on principal-to-principal basis has rightly demanded duty from the job worker. Whether non-compliance of these conditions is only procedural as claimed by the appellant needs to be examined. The Supreme Court of India in the case of Commissioner of C. Ex., New Delhi vs. Hari Chand Shri Gopal: 2010 (260) E.L.T. 3 (S.C.) observed as follows: "22. The law is well settled that a person who claims exemption or concession has to establish that he is entitled to that exemption or concession. A provision provi....
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....unal 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, in the present case no Delivery Challans were filed by the appellant nor any intimation was given to the department on their job worked goods especially when they themselves were clearing the same goods as manufactured by them on payment of duty. 7. With regard to limitation, the Commissioner has held that the appellant has not brought the fact of manufacture/process of PPCBs under job-work and nowhere they have claimed that duties not to be paid on job-worked goods. Being aware of the fact that they were themselves clearing PPCBs on payment of duty, they should have cleared the job-worked PPCBs also on payment of duty. However, the appellant claims in the year 2009 audit was conducted and the audit officer vide letter dated 05.10.2009 had written to the appellant seeking clarification regarding non-payment of duty on job-work undertaken for non-manufacturers. The appellant vide letter dated 07.01.2010 replie....
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....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 instance, letter dated 10.12.2011 from M/s. Micro Pack Limited it is clearly stated that "we have sent the components and PCBs to M/s. Design and Assemblies Inc. for the component assembly with work order as per the details. We have delivered the PCBs to our end customers by paying Excise duty for the PCBs as components. This may be verified by the records which are enclosed herewith". There is another letter dated 27.12.2011 addressed to the Additional Commissioner of Central Excise (Preventive) by M/s. Versebyte Data Systems Private Limited wherein they have stated that the final products are cleared under exemption vide notification No. 10/97 meant for defence purpose. Similarly, M/s. Centum has also vide letter dated 13.12.2012 informed the department that the goods received from the appellant were used for the manufacture of dutiable of goods which was subsequently exported by them. M/s. Ananth Technologies Ltd; vi....