TaxTMI 
TaxTMI 
2024 (12) TMI 789
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....Only) under Section 11AA/11AB of the Central Excise Act, 1944 as applicable 3. I also impose penalty of Rs. 71,80,964.00 (Rupees Seventy One Lakhs Eighty Thousand Nine Hundred Sixty Four Only) on them under Section 11AC of the Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules 2002 for contravention of various provisions of Central Excise Act, 1944 and Central Excise Rules made there under, as discussed, supra 2.1 Appellant is engaged in the manufacture of Wire Harness, Automobile and wire Harness Electrical, falling under Tariff item No.85443000, 85369090 to the first schedule of Central Excise Tariff Act, 1985 on job work basis for M/s Nippon Audiotronix Ltd, are registered with Central Excise under Registration No.AAABCJ7521MEM003. 2.2 To undertake the job-work they utilized some inputs purchased by them and others supplied free of cost by the prime manufacturer. The central excise duty is being paid on the value on the final product arose by adding/ using their own inputs. The value of inputs supplied free of cost by the manufacturer are not being included for paying central excise duty at job-workers end, while this should be included in the assessabl....
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....71,80,964 2.5 A Show cause notice dated 30.04.2014 was issued to appellant asking them to show cause as to why: 1. Central Excise duty of Rs. 71, 80, 964.00 (Rupess Seventy One Lakh Eighty Thousand Nine Hundred Sixty Four only) should not he not be recoversd from them under the provisions of Section 11A (4) of the Central excise Act 1944 for the period 2009-2014. 2. Interest on the above amount should not be demanded from them under Section 11 AA/11 AB of the Central excise Act, 1944 3. Penalty under rule 25 of Central Excise Rules, 2002 read with section 11AC of the Central Excise Act, ibid should not be imposed on them 2.6 Show Cause Notice has been adjudicated as per the impugned order referred in para 1 above. 2.7 Aggrieved appellant has filed this appeal. 3.1 We have heard Shri Atul Gupta with Usmeet Kaur Monga, Advocate for the appellants and Shri santosh Kumar Authorized representative for the revenue. 3.2 Arguing for the appellant learned counsels submit: * Appellant is not liable to pay duty on the raw material supplied by the principal manufacturer. Goods supplied by the principal manufacturer under Rule 4(5)(a), hence, no duty liability on the job worker.....
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....ta] * The benefit under Notification 214/ 86-CE was alternatively available. It is the responsibility of the principal manufacturer to provide undertaking to the Assistant/ Deputy Commissioner of the Central Excise. In case of failure in executing its responsibility, the job worker may not be denied the benefit of the notification 214/84- CE. Reliance is placed on following decisions: o Fabkraft Industries [2023 (5) TMI 931 - Cestat Mumbai] o Saravana colour Match Works [2024 (3) TMI 1225- CESTAT Chennai] o Bharat Aluminium Co. Ltd. [2021 (375) ELT 379 (Tri- Del)] * Without prejudice the arguments presented in the preceding paragraph and assuming, solely for the sake of argument, the appellant was required to include value of goods supplied by the principal manufacturer when calculating duty on goods cleared to the principal manufacturer, it is submitted that entire exercise would be revenue neutral. The appellant relies on the following decisions wherein it has been held that duty cannot be demanded from an assessee in a revenue neutral situation: o Nirlon Ltd. [2015 (320) ELT 22 (SC)] o Goa Industrial Products [2005 (181) ELT 222 (Tri. Mum)] * On conjoint rea....
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....2006-2007,2007-2008, and 2008-2009 in the month of November, 2009. The appellant has been following the procedures of clearing the goods to the principal manufacturer by paying the duty on the value of its own inputs and job work charges from the year 2006- 2007. Hence, the department was in knowledge of the working of the appellant from the year 2009 when the first audit was conducted Reliance is placed on the Gannon Dunkerley & Co. Ltd [2021 (47) G.S.T.L. 35 (Tri. - Del.)] where it was concluded that extended period cannot be invoked when the department was aware of all the facts. * The Department has failed to show any positive act on the part of the Appellant to suppress information. The Impugned Order does not disclose any evidence of any positive act of fraud, suppression, or wilful misstatement, with the intention to evade payment of duty on the part of the Appellant. The SCN read with the Impugned Order, only make bald allegations without any strong evidence about the intention of the Appellant Reliance is placed on the following decisions: o PVR Ltd. [2021 (55) G.S.T.L. 435 (Tri- Del.)] o Anand Nishikawa Co.Ltd.[2005 (188) E.L.T. 149 (S.C.)] o Ajay Mishra [2023 (....
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....laced on: o Brindavan Beverages (P) Ltd. & Ors. [(2007) 5 SCC 388] o SACI Allied Products Ltd. [2005 (183) ELT 225 (SC)] o Ramlala [2023 SCC Online ALL 2479] o Inox Leisure Ltd. [2022 (60) G.S.T.L. 326 (Tri. - Hyd.)], affirmed by the Supreme Court as reported at [2022 (61) G.S.T.L. 342 (S.C.)] o Ballarpur Industries Ltd., [(2007) 8 SCC 89] o Suresh Synthetics, [(2021) 19 SCC 599] o Toyo Engg. India Ltd., [(2006) 7 SCC 592 o Hindustan Polymers Co. Ltd. [(1997) 11 SCC 302] o Jitendra Kumar [2023 SCC OnLine All 2837] * The show cause notice has just vaguely tried to impose Rule 10A, without even specifying under which sub-rule the case of appellant lies. It is important for the appellant to know the exact nature of the allegation in order to prepare for an appropriate reply. Reliance is placed on o Amrit Foods [2005 (190) ELT 433 (S.C.)] o Balaji Enterprises [2020 (3) TMI 17] o Swapnil Asnodkar [2018(10) GSTL 479 (Tri. -Mumbai)] * They also relied upon the following decisions: o International Auto Ltd. [2005 (183) ELT 239 (SC)] o Kailash Auto Builders Ltd. [2004 (178) ELT 786 (T-Bang)] o Ghatge Patil Industries Ltd. [2015 (320) ELT 646 (TMumbai) ....
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....ackaging materials, in the production of such goods iv) value of engineering, development, art work, design work and plans and sketches undertaken elsewhere than in the factory of production and necessary for the production of such goods Rule 10A - Where the excisable goods are produced or manufactured by a job-worker, on behalf of a person (hereinafter referred to as principal manufacturer), then. (i) in a case where the goods are sold by the principal manufacturer for delivery at the time of removal of goods from the factory of job- worker, where the principal manufacturer and the buyer of the goods are not related and the price is the sole consideration for the sale, the value of the excisable goods shall be the transaction value of the said goods sold by the principal manufacturer; (ii) in a case where the goods are not sold by the principal manufacturer at the time of removal of goods from the factory of the job-worker, but are transferred to some other place from where the said goods are to be sold after their clearance from the factory of job-worker and where the principal manufacturer and buyer of the goods are not related and the price is the sole consideration....
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....July, 2002 issued vide F. No 6/39/2000 - CX Government of India, Ministry Of Finance, Department Of Revenue Central Board of Excise & Customs clearly clarifies the doubts under the new Valuation Rules made effective from 1/7/2000 and as per point 13 of the Circular it is described that "how will valuation of samples be done which are distributed free, as part of marketing strategy, or as gifts or donations?" in a manner specified as. Since the goods are not sold section 4(1)(a) will not apply and recourse will have to be taken to the Valuation Rules. No specific rule covers such a contingency. Except rule 8 all the other rules cover contingencies where sale is involved in some form or the other. Therefore, the residuary rule 11 will have to be adopted along with the spirit of rule 8. In other words, the assessable value would be 115% of the 'cost of production or manufacture' of the goods. Further, at point no. 3 of the said Circular it has been clarified that "How will valuation be done in case of Job work?" and for the sake of simplicity it has been clarified that "Refer to Board's Circular No 619/10/2002-CX dt. 19/2/2002. Cost of transporting the raw materials/....
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....led to submit the required information/challans as asked by the Range Officer through various letters whereas the requisite documents were submitted only after issuance of Summon dated 31.03.2014. In view of above, the party has clearly contravened the provision of Rule 6 & Rule 10A of Central Excise valuation the (Determination of Price of Excisable Goods) Rules, 2000 in as much as they did not assess the transaction value in a proper manner by not including value of materials, components, parts and similar items that were being received from the principal manufacturer and used in the manufacture of goods on job work basis for discharging the duty liability. They have also not disclosed these facts to the department and liable themselves for penal action. In the light of facts narrated above, it is clear that the party has intentionally suppressed the vital/material facts from the department with intent to evade payment of Central Excise Duty. Thus I hold that the extended time limit has been rightly invoked under the provisions of Section 11A (4) of the Central Excise Act, 1944. In the light of aforementioned observation, I hold that that the value of goods received from th....
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....ed in the impugned show cause notice as the party intentionally did not include parts of inputs supplied free of cost on the value on the final product which should be included in the assessable value for payment of Central Excise duty in terms of Rule 6 of Central Excise Valuation (Determination Of Price Of Excisable Goods) Rules, 2000 inasmuch as they did not assess the transaction value in a proper manner by not including value of materials, components, parts and similar items that were being received from the principal manufacturer and used in the manufacture of goods on job work basis for discharging the duty liability. They have also not disclosed these facts to the department and intentionally suppressed the vital/material facts with intent to evade payment of Central Excise Duty. As such they themselves are liable for penal action. Thus, 1 hold that penalty has rightly been imposed upon them under section 11AC of the Central Excise Act, 1944 for contravention of various provisions of Central Excise Act, 1944 and Central Excise Rules made there under. The party has submitted various case law in their support in their written submissions vide dated reference no. nil dated ....
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.... to let in evidence thereon. When the facts necessary to make out a particular claim, or to seek a particular relief, are not found in the plaint, the court cannot focus the attention of the parties, or its own attention on that claim or relief, by framing an appropriate issue. As a result the defendant does not get an opportunity to place the facts and contentions necessary to repudiate or challenge such a claim or relief. Therefore, the court cannot, on finding that the plaintiff has not made out the case put forth by him, grant some other relief. The question before a court is not whether there is some material on the basis of which some relief can be granted. The question is whether any relief can be granted, when the defendant had no opportunity to show that the relief proposed by the court could not be granted. When there is no prayer for a particular relief and no pleadings to support such a relief, and when defendant has no opportunity to resist or oppose such a relief, if the court considers and grants such a relief, it will lead to miscarriage of justice. Thus it is said that no amount of evidence, on a plea that is not put forward in the pleadings, can be looked into to ....
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.... involved in the trial, and did they lead evidence about it? If it appears that the parties did not know that the matter was in issue at the trial and one of them has had no opportunity to lead evidence in respect of it, that undoubtedly would be a different matter. To allow one party to rely upon a matter in respect of which the other party did not lead evidence and has had no opportunity to lead evidence, would introduce considerations of prejudice, and in doing justice to one party, the Court cannot do injustice to another." (emphasis supplied) The principle was reiterated by this Court in Ram Sarup Gupta (dead) by LRs., vs. Bishun Narain Inter College [AIR 1987 SC 1242]: "It is well settled that in the absence of pleading, evidence, if any, produced by the parties cannot be considered. It is also equally settled that no party should be permitted to travel beyond its pleading and that all necessary and material facts should be pleaded by the party in support of the case set up by it. The object and purpose of pleading is to enable the adversary party to know the case it has to meet. In order to have a fair trial it is imperative that the party should state the essential ma....
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.... that the pleadings and issues are sufficient to make out a particular case and that the parties proceeded on that basis and had led evidence on that case. Where neither party puts forth such a contention, the court cannot obviously make out such a case not pleaded, suo moto." 4.4 The case has been clearly spelt out against the appellant in the show cause notice, and it has been stated specifically and clearly that appellant were not including the value of free supply material from prime manufacturer, while clearing the job worked goods on payment of duty. Thus they were determining the assessable value contrary to the provisions of Rule 6 and Rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. Even the impugned order is very specifically deciding the case after considering the submissions made, recording specific findings on the issues raised in the show cause notice and the submissions (pleadings) made by the appellant before the Commissioner. As we do not find anything vague in the impugned order or show cause notice, the submissions made by the appellant in this regards are rejected and the decisions relied upon for this purpose. ....
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....correctness of the inclusion in the assessable-value the cost of the Grey fabric and the processing charges. The Referring Bench held: "We cannot accept the contention of the learned counsel on behalf of the petitioners and the appellants that the value of the grey cloth which is processed by the processor should not be included in the assessable value of the processed fabric...." 29. In the argument, as presented, that the assessable value would include what is referred to as the "post manufacturing profits", there is an obvious fallacy. In Atic Industries Ltd. v. H.H. Dave, Asstt. Collector of Central Excise and Others [1975 (3) SCR p. 563] Bhagwati J. speaking for the Court said: "The value of the goods for the purpose of excise must take into account only the manufacturing cost and the manufacturing profit and it must not be loaded with post manufacturing cost or profit arising from post manufacturing operation...." ".....It may be noted that wholesale market in a particular type of goods may be in several tiers and the goods may reach the consumer after a series of wholesale transactions. In fact the more common and less expensive the goods, there would be greater ....
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....throw light on the nature of the levy but is not determinative of it. When a statutory measure for assessment of the tax is contemplated, it "need not contour along the lines which spell out the levy itself.", and "a broader based standard of reference may be adopted for the purposes of determining the measure of the levy." Any statutory standard which maintains a nexus with the essential character of the levy can be regarded as a valid basis for assessing the measure of the tax. 30. In the case of processing-houses, they become liable to pay excise duty not because they are the owners of the goods but because they cause the "manufacture" of the goods. The dimensions of the Section 4(1) (a) and (b) are fully explored in a number of decisions of this Court. Reference may be made to the case of Bombay Tyres International. Consistent with the provisions of Section 4 and the Central Excise (Valuation) Rules, 1975, framed under Section 37 of the Act, it cannot be said that the assessable-value of the processed fabric should comprise only of the processing charges. This extreme contention if accepted, would lead to and create more problems than it is supposed to solve; and produce ....
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....scuits are made, they are given back to or are delivered under the instructions of Britannia. The appellant was entitled to receive processing charges which include its expenses plus profits for the purpose of determining the excise value. However, the cost of the raw material supplied by Britannia will have to be included in addition to the appellant's manufacturing costs and profit. What cannot be included on the ratio of Ujagar Prints' case is any profit of Britannia or expenses which are incurred after the manufacture of the biscuits by the appellant. Despite repeated attempts made by the learned counsel for the respondent, we are unable to distinguish this case from the ratio laid down by this Court in the aforesaid two decisions of Ujagar Prints' case. 4.7 In case of S. Kumars Ltd [2005 (190) E.L.T. 145 (S.C.)], Hon'ble Supreme Court again observed as follow: "18. The actual wholesale price was jettisoned in favour of a deemed sale price by the processor to the merchant manufacturer. 19. The decision in M/s. Ujagar Prints III was construed and followed subsequently by this Court in Pawan Biscuits Company Private Limited v. Collector of Central Excise - (2000) 120 E.L.T....
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....re prescribed in Rule 6(b)(ii). As we have seen Rule 6(b) deals with excisable goods which are not sold by assessee but "are used" or "consumed" by him or on his behalf in the production or manufacture of "other" articles. In such case, the value of the excisable goods is to be based either (i) on the value of the comparable goods produced or manufactured by the assessee or by any other assessee, or if that is not possible under (ii) on the cost of production or manufacture, including profits, if any, which the assessee would have normally earned on the sale of such goods. 22. We do not agree that if Section 4(1)(b) is invoked Rules 4 and 5 do not apply. We have already held that Rule 3 does not make any distinction between the rules which may be invoked even when Section 4(1)(b) is invoked. If none of the rules i.e. 4, 5 or 6, in terms apply, then Rule 7 would. In other words, the sale which is referred to in Rules 4, 5 and 6 may in the circumstances reflect a notional sale and provide a guideline for applying analogous principles mutatis mutandis under Rule 7. 23. Rule 6(b) relied on by the respondent does not in terms apply. As we have noted, Rule 6(b)(ii) envisages a situ....
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....such intermediate goods in manufacture of final products but did not pay any duty on clearance of such final products. 7.1 The term "manufacture" is defined under Section 2(f) of the Central Excise Act which includes any process - (i) Incidental or ancillary to the completion of a manufactured product; and (ii) Which is specified in relation to any goods in the Section or Chapter notes of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture; or (iii) Which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration 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; [Emphasis supplied] The definition of the manufacturer says that any person who is engaged in any of t....
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....se on such goods.] [(2) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by special order in each case, exempt from payment of duty of excise, under circumstances of an exceptional nature to be stated in such order, any excisable goods on which duty of excise is leviable.] [(2A) The Central Government may, if it considers it necessary or expedient so to do for the purpose of clarifying the scope or applicability of any notification issued under sub-section (1) or order issued under sub-section (2), insert an explanation in such notification or order, as the case may be, by notification in the Official Gazette at any time within one year of issue of the notification under sub-section (1) or order under sub-section (2), and every such explanation shall have effect as if it had always been the part of the first such 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....
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....actory as a job work and :- (a) used in relation to the manufacture of final products, specified in column (2) of the said Table, (i) on which duty of excise is leviable in whole or in part; or (ii) for removal 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 for supply to the United Nations or an international organisation for their official use or for supply 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, or (iii) for removal under bond for export, or (b) cleared as such from the factory of the supplier of raw 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 Te....
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.... the manufacture or finishing of an article or any operation which is essential for the aforesaid process. Explanation II shall be omitted. (vide Notification No. 33/2000-C.E., dated 31-3-2000) TABLE Description of Inputs Description of final products (1) (2) All goods falling under the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than high speed diesel oil and motor spirit, commonly known as petrol. All goods falling under the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than the following, namely :- (i) matches; (ii) fabrics of cotton or man-made fibres falling under Chapter 52, Chapter 54 or Chapter 55 of the First Schedule to the said Act; (iii) fabrics of cotton or man-made fibres falling under Heading Nos. 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 job worker, are exempted only if the same are used by ....
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....which shall be valid for a financial year, in respect of removal of such input or partially processed input, and subject to such conditions as he may impose in the interest of revenue including the manner in which duty, if leviable, is to be paid, allow final products to be cleared from the premises of the job worker. 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. 7.5 Similarly Rule 4(6) is concerned with the condition under which the finished goods, manufactured fro....
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....lowing the procedure and conditions of the Notification (supra) only by the principal manufacturer, the job worker would be saved from payment of duty on goods manufactured by him. 7.8 In the case under reference, the facts of non-payment of duty on final products by the principal manufacturer is not disputed. The goods received from the job worker were not used in the manufacture of dutiable final products but in goods on which no duty was paid. In such case when the principal manufacturer did not intend to pay duty on the final products, the job worker who is manufacturer of intermediate goods is liable to pay duty. Non-compliance of Notification No. 214/86-C.E., dated 25-3-1986 by the principal manufacturer has resulted into duty liability upon the job worker. Moreover, it is admitted by the appellant (job worker) that the inputs were not sent by the principal manufacturer under Notification No. 214/86-C.E. If the contention of the appellant is accepted it would lead to the situation where neither the principal manufacturer nor the job worker 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. ....
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....oods. 7.11 Rule 4(6) is a facility to the principal manufacturer to clear the goods directly from the premises of job worker after payment of duty. Notably it is not the case of the appellant that the principal manufacturer paid duty at anytime as the goods manufactured by him were exempted from duty. Thus the liability for payment of duty on such intermediate goods manufactured by the job worker is on job worker only. 7.12 The Tribunal order in case of Vandana Dyeing Pvt. Ltd. v. CCE, Mumbai - 2014 (307) E.L.T. 528 (Tri.) and Mukesh industries Ltd. v. CCE, Ahmedabad - 2009 (248) E.L.T. 203 (Tri.) were rendered considering Rule 4(5)(a) of Cenvat Credit Rules, 2001 and 2002 Rules as pari materia to 57F(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 job work 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 Tribunal's order in case of Dhana Singh Synthetics Pvt. Ltd.....
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....ng grey MMF and knitted or crocheted fabrics from principal manufacturer under the cover of challans issued under Rule 4(5)(a) of Cenvat Credit Rules, 2001 and after completion of job work the goods stand returned to the principal manufacturer - Rule 57F(3) of erstwhile Central Excise Rules, 1944 and Rule 4(5)(a) ibid being independent provisions, fact that goods were not specified in the Notification No. 214/86-C.E. will not make a difference - No duty liability can be fastened upon the job worker - Section 3 of Central Excise Act, 1944. [para 4]." Similarly in the case of Dhana Singh Synthetics Pvt. Ltd. v. CCE, (supra) it was held as under : "Demand - Job worker - 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....
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..../86-C.E. The Tribunal rightly held that if the job worker has paid duty even though he was eligible to avail exemption under the Notification, the principal manufacturer was eligible for the credit thereof as he was liable to pay duty on clearance of the final goods. Tribunal held that had the Notification No. 214/86 not issued, even under Rule 57F(2) the job worker had to pay duty. Thus it follows that it is only by virtue of notification (supra) the goods manufactured at job workers end are exempted only if the same or the final product in which such intermediate goods are used are liable for duty at the end of the principal manufacturer which is absent in the present reference. 7.17 In case of Collector v. Bright Steel Mac Fabrics - 1994 (69) E.L.T. 276 (Tribunal) as upheld by the Hon'ble Apex Court in case of CCE v. Bright Steel Mac Fabrics - 1997 (94) E.L.T. A145 (S.C.), 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 v. CCE, Delhi - 2000 (122) E.L.T. 481 (Tri.), the Appellate Tribunal confir....
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.... the assessee job worker i.e. the appellant failed to bring any evidence on record to prove that the supplier of raw material had supplied the materials to them under the provisions of Notification No. 214/86 and thus the duty demand against the assessee undertaking job work was upheld. The ratio laid down in the said judgment is squarely applicable to the present reference. 7.20 In case of Commissioner v. Span Heat Transfer Equip. Mfrs. P. Ltd. - 2001 (135) E.L.T. 861 Tribunal held that the Notification No. 214/86-C.E. envisages the duty payment by the supplier of the goods for job work if he undertakes to pay the same. In the normal course of business, it is the job worker being manufacturer is liable to pay duty. We are in agreement with such views of the Tribunal as in absence of undertaking by the principal manufacturer to discharge duty liability on the job worked goods, it is the manufacturer of goods i.e. job worker who is liable to pay duty. The order of Tribunal in case of M/s. Jinabakul Forge Pvt. Ltd. v. Commissioner - 1997 (93) E.L.T. 373 (Tri.) relied upon by the Revenue is also on the identical issue. Same views has been taken by the Tribunal in case of M/s. Inter....
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....n the final product is removed from such manufacturers‟ factory. As far as the appellant, (the intermediate purchaser) is concerned, it is not liable to pay duty on the inputs supplied by TELCO since it had not taken the credit for the Modvat in respect of inputs. It is submitted that it cannot be called upon to pay the duty in respect of those inputs nor can the value of the inputs be added to the excisable value of the assemblies. 6. We are of the view that the submission of the appellant is correct. The Tribunal appears to have been confused between the manufacture of the final product, namely, excavators and the manufacture of the intermediate product, namely, the floor plate assemblies. The scheme of Modvat permits the person who clears the ultimate final product to take the benefit of the Modvat scheme at the time of clearance of such final product. The manufacturer of the final product, in this case TELCO, would therefore, be entitled not only to adjust the credit on the inputs supplied by it to the intermediate purchaser such as the appellant but also to the credit for the duty paid by the intermediate purchaser on its products. The reliance on the decision in Burn....
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.... of the said goods will be by application of the valuation rules mutatis mutandis. 4.12 Rule 16A was also inserted in Central Excise Rules, 2002 by Notification No 17/2003-CE (NT) dated 13.03.2003 with effect 01.04.2003 from to provide as under: RULE 16A Removal of goods for job work, etc.. - Any inputs received in a factory may be removed as such or after being partially processed to a job worker for further processing, testing, repair, re-conditioning or any other purpose subject to the fulfilment of conditions specified in this behalf by the Principal Commissioner of Central Excise or Commissioner of Central Excise, as the case may be] having jurisdiction. 4.13 Rule 4 (5) (a) of the CENVAT Credit Rules, 2004 (5) (a) The CENVAT credit shall be allowed even if any inputs or capital goods as such or after 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 manufacturer or provider of output service taking the CENVAT credit that the goods are received back in the factory within one hundred and eighty d....
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....e materials so sold. 8.3 When the processes/activities undertaken by the job worker amounts to manufacture, the job worker is construed as the manufacturer and, therefore, the job worker becomes liable to pay excise duty. However, by Notification No. 214/86-C.E., dated 25-3-1986, it has been provided that instead of the job worker, the liability can be discharged by the principal manufacturer subject to the conditions mentioned in the said notification. 8.4 Cenvat Credit Rules provide for taking credit by the principal manufacturer and sending the material without reversing the credit for the purpose of job work. It also provides for taking credit on any input or input service used in the manufacture of intermediate product by the job worker. This is evident from Rule 3 of the Cenvat Credit Rules the relevant portion of which read as under : "Rule 3 - Cenvat credit. - A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit of ...... including the said duties, or tax, or cess paid on any input or input service, as the case may be, used in the manufacture of intermediate products, by a job worker availing the benefit of e....
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....ntermediate goods necessary for the manufacture of final products) or any other purpose, and it is established from the records, challans or memos or any other document produced by the manufacturer or provider of output service 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 or provider of output service 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 or provider of output service can take the Cenvat credit again when the inputs or capital goods are received back in his factory or in the premises of the provider of output service." 9.5 From the above, it could be seen that removal of the goods by manufacturer-appellant under Rule 4(5)(a) of the Cenvat Credit Rules is not restricted for the purpose of manufacture of excisable goods and it can also be for the purpose of undertaking any process which may not amount to manufacture. 9.6 Rule 4(5)(a) of the Cenvat Cred....
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....er stands decided by the Honourable Supreme Court, we would hold in favour of assessee." 4.15 We find that assessable value of the goods for the purpose of payment of duty is to be determined as per section 4 of the Central Excise Act, 1944 read along with the Central Excise (Determination of Price of Excisable Goods) Valuation Rules, 2000. Rule 6 of the valuation rules has been reproduced in the impugned order which clearly provide for addition of any additional consideration received by the appellant in any form to the transaction value for arriving at the assessable value. In terms of the decision of the Hon'ble Supreme Court in case of Ujjagar Prints & Pawan Biscuits and similar other decisions the value of raw material supplied for job work should have been added to arrive at the assessable value. The determination of assessable value made under the Section matter, is not subjected to admissibility of CENVAT credit to the appellant in respect of free supply material. The provisions contained in Section 2 (h) of Central Excise Act, 1944 and Rule 10A and Rule 6 of the Valuation Rules, 2000 were not before the Hon'ble Supreme Court in the case of International Auto. Thus in our....
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....nown principle that a person who claims an exemption has to establish his case. ... The choice between a strict and a liberal construction arises only in case of doubt in regard to the intention of the legislature manifest on the statutory language. Indeed, the need to resort to any interpretative process arises only where the meaning is not manifest on the plain words of the statute. If the words are plain and clear and directly convey the meaning, there is no need for any interpretation. It appears to us the true rule of construction of a provision as to exemption is the one stated by this Court in Union of India v. Wood Papers Ltd. [(1990) 4 SCC 256 = 1990 SCC (Tax) 422 = JT (1991) SC 151]." Three important aspects which comes out of the discussion are the recognition of horizontal equity by this Court as a consideration for application of strict interpretation, subjugation of strict interpretation to the plain meaning rule and interpretation in favour of exclusion in light of ambiguity. 38. We will now consider another Constitution Bench decision in Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal, (2011) 1 SCC 236 = 2010 (260) E.L.T. 3 (S.C.) [herein....
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....noncompliance of which would not affect the essence or substance of the notification granting exemption." 39. The Constitution Bench then considered the doctrine of substantial compliance and "intended use". The relevant portions of the observations in paras 31 to 34 are in the following terms - "31. Of course, some of the provisions of an exemption notification may be directory in nature and some are mandatory in nature. A distinction between the provisions of a statute which are of substantive character and were built in with certain specific objectives of policy, on the one hand, and those which are merely procedural and technical in there nature, on the other, must be kept clearly distinguished... Doctrine of substantial compliance and "intended use" 32. The doctrine of substantial compliance is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can reasonably be expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the "essence" or the "substance" of the requirements. Like the concept of "reasonableness", the acceptance or otherwise of a plea of "substantial c....
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....n that they are not of the "essence" of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilled by substantial, if not strict compliance. In other words, a mere attempted compliance may not be sufficient, but actual compliance with those factors which are considered as essential." 41. After thoroughly examining the various precedents some of which were cited before us and after giving our anxious consideration, we would be more than justified to conclude and also compelled to hold that every taxing statute including, charging, computation and exemption clause (at the threshold stage) should be interpreted strictly. Further, in case of ambiguity in a charging provisions, the benefit must necessarily go in favour of subject/assessee, but the same is not true for an exemption notification wherein the benefit of ambiguity must be strictly interpreted in favour of the Revenue/State. 42. In Govind Saran Ganga Saran v. Commissioner of Sales Tax, 1985 Supp (SCC) 205, this Court pointed out three components of a taxing statute, namely subject of the tax; person liable to pay tax; and the rate at which the tax is to be levied. If there i....
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.... only as a prelude to better understand jurisprudential basis for our conclusion. We may now consider the decisions which support our view. 44. In Hansraj Gordhandas case (supra), the Constitutional Bench unanimously pointed out that an exemption from taxation is to be allowed based wholly by the language of the notification and exemption cannot be gathered by necessary implication or by construction of words; in other words, one has to look to the language alone and the object and purpose for granting exemption is irrelevant and immaterial. 45. In Parle Exports case (supra), a Bench of two-Judges of this Court considered the question whether non-alcoholic beverage base like Gold spot base, Limca base and Thumps Up base, were exempted from payment of duty under the Central Government notification of March, 1975. While considering the issue, this Court pointed out the strict interpretation to be followed in interpretation of a notification for exemption. These observations are made in para 17 of the judgment, which read as follows : "How then should the Courts proceed? The expressions in the Schedule and in the notification for exemption should be understood by the language....
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....f the entire para, as extracted hereinabove would, however, suggest that an exception to the general rule of tax has to be construed strictly against those who invoke for their benefit. This was explained in a subsequent decision in Wood Papers Ltd. case (supra). In para 6, it was observed as follows : "... In Collector of Central Excise v. Parle Exports (P) Ltd., (1989) 1 SCC 345, this Court while accepting that exemption clause should be construed liberally applied rigorous test for determining if expensive items like Gold Spot base or Limca base of Thums Up base were covered in the expression food products and food preparations used in Item No. 68 of First Schedule of Central Excises and Salt Act and held "that it should not be in consonance with spirit and the reason of law to give exemption for non-alcoholic beverage basis under the notification in question". Rationale or ratio is same. Do not extend or widen the ambit at stage of applicability. But once that hurdle is crossed construe it liberally. Since the respondent did not fall in the first clause of the notification there was no question of giving the clause a liberal construction and hold that production of goods by ....
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...., a taxing statute should be construed in favour of the assessee - assuming that the said principle is good and sound - does not apply to the construction of an exception or an exempting provision, they have to be construed strictly. A person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of it must go to the State...." 50. In Tata Iron & Steel Co. Ltd. v. State of Jharkhand, (2005) 4 SCC 272, which is another two-Judge Bench decision, this Court laid down that eligibility clause in relation to exemption notification must be given strict meaning and in para 44, it was further held - "The principle that in the event a provision of fiscal statute is obscure such construction which favours the assessee may be adopted, would have no application to construction of an exemption notification, as in such a case it is for the assessee to show that he comes within the purview of exemption (See Novopan India Ltd. v. CCE and Customs)." 51. In Hari Chand case (supra), as already discussed, the question was whether a person claiming exemption is re....
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....doing a thing the same should be done in that manner or not at all". In case of Mahendra Singh [2022 SCC OnLine SC 909] Hon'ble Supreme Court has observed as follows: 14. ....... It is well settled that if a particular procedure in filling up the application form is prescribed, the application form should be filled up following that procedure alone. This was enunciated by Privy Council in the Nazir Ahmad v. King Emperor [1936 SCC OnLine PC 41], wherein it was held that "that where a power is given to do a certain thing in a certain way the thing must be done in that way or not at all. Other methods of performance are necessarily forbidden." 15. A three Judge Bench of this Court in a judgment reported as Chandra Kishore Jha v. Mahavir Prasad & Ors. [(1999) 8 SCC 266], held as under: "17....................It is a well-settled salutary principle that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner. (See with advantage: Nazir Ahmad v. King Emperor, Rao Shiv Bahadur Singh v. State of V.P. [AIR 1954 SC 322 : 1954 SCR 1098] , State of U.P. v. Singhara Singh [AIR 1964 SC 358 : (1964) 1 SCWR 57] .) An....
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.... such schemes devised by the tax legal pundits are designed to burden the honest tax payer and protect the evaders. We would refer to the decision of Hon'ble Supreme Court in case of Mc Dowell & Company Limited [1985 (3) SCC 230] wherein Hon'ble Supreme Court observed as follows: "The shortest definition of tax avoidance that I have come across is "the art of dodging tax without breaking the law." Much legal sophistry and judicial exposition have gone into the attempt to differentiate the concepts of tax evasion and tax avoidance and to discover the invisible line supposed to exist which distinguishes one from the other. Tax avoidance, it seems, is legal: tax evasion is illegal. Though initially the law was, and I suppose the law still is, "there is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be. implied'', during the period between the two world wars, the theory came to he propounded and developed that it was perfectly open for persons to evade (avoid) income tax if they could do so legally. For some time it looked as if tax avoidance was even viewed with affection. Lord Sumner in inland Revenue Commissioners v. ....
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.... finding that documents or transactions are not "shams", from considering what, as evidenced by the documents themselves or by the manifested intentions of the parties, the relevant transaction is. They are not, under the Wes/minister doctrine or any other authority, bound to consider individually each separate step in a composite transaction intended to be carried through as a whole." Later again he observed, "*** ... For the taxpayers it was said that to accept the revenue's wide contention involved a rejection of accepted* and established canons and that, if so general an attack upon schemes for tax avoidance as the revenue suggest is* to be validated, that is a matter for Parliament. The function of the courts is to apply strictly and correctly the legislation which Parliament has enacted: if the taxpayer escapes the charge, it is for Parliament, if it disapproves of the result, to close the gap. General principles against' tax avoidance are, it was claimed, for Parliament to lay down. We were referred, at our request, in this connection to the various enactments by which Parliament bas from time to time tried to counter tax avoidance by some general prescription.....
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....1982JiS.T.C. 30)] where Lord Dip lock said, "It would be disingenuous to suggest, and dangerous on the part of those who advise on elaborate tax-avoidance schemes to assume, that Ramsay's case did not mark a significant change in the approach adopted by this House in its judicial role to a pre-ordained series of transactions (whether or not they include the achievement of a legitimate commercial end) into which there are inserted steps that have no commercial purpose apart from the avoidance of a liability to tax which in the absence of those particular steps would have been payable. The difference is in approach. It does not necessitate the overruling of any earlier decisions of this House ; but it does involve recognising that Lord Hamlin's oft-quoted dictum in !RC v. Duke of West minister(') "Every man is entitk:d if he can to order his affairs so as that the tax attaching under the appropriate Acts h less then it otherwise would be", tell us Ii/Ile or nothing as to what methods of ordering one's affairs will be recognised by the courts as effective to lesson the tax what would attach to them if business transactions were conducted in a straight-forward way." ....
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....fectiveness of the device depends not upon considerations of morality, but on the Legislative injunction in taking statutes may not, except on period of penalty, be violated, but it may lawfully be cumvented." The same Judge, speaking for himself, Ramaswami and Grover JJ in Commissioner of income tax, Gujarat v. Kharwar [72 ITR 603] expressly followed West minister and observed: "The taxing authority is entitled and is indeed bound to determine the true legal relation resulting from a transaction. If the parties have chosen to conceal by a device the legal relation, it Is open to the taking authorities to unravel the device and to determine the true character of relationship. But the legal effect of a transaction cannot be displaced by probing into the "substance of the transaction". We think that time has come for us to depart from the West minister principle as emphatically as the British Courts have done and to dissociate ourselves from the observations of Shah, J. and similar observations made elsewhere. The evil consequences of tax avoidance are manifold. First there is substantial loss of much needed public revenue, particularly in a welfare state like ours. Next the....
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....e to avoid taxation. It is upto the Court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and consider whether the situation created by the devices could be related to the existing legislation with the aid of 'emerging' techniques of interpretation as was done in Ramsay, Burma Oil and Dawson, to expose the devices for what they really are and to refuse to give judicial benediction.‟ 4.21 As we uphold the demand of central excise duty demand for interest will follow as natural consequence (as per decisions referred in impugned order) and the penalties imposed under section 11AC of the Central Excise are justified in view of the decision of Hon'ble Supreme Court in case of Rajasthan Spinning and Weaving Mill [2009 (238) ELT 3 (SC)] wherein following has been observed: "17. The main body of Section 11AC lays down the conditions and circumstances that would attract penalty and the various provisos enumerate the conditions, subject to which and the extent to which the penalty may be reduced. 18. One cannot fail to notice that both the proviso to subsection 1 of Section 11A and Section 11AC use the same expressions : ".......