TaxTMI 
TaxTMI 
2024 (12) TMI 789
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....ty One Lakhs Eighty Thousand Nine Hundred Sixty Four 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 j....
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.... 30155 15078 1552995 2013-14 1985136 12.36 238216 4764 2382 245363 TOTAL 6971810 139436 69718 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: • Appellan....
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....E.L.T. 713 (Tri. - Mumbai)] o P.R. Rolling Mills Pvt. Ltd. [2010 (249) ELT 232 (Tri- Bang)] o Haldia Petrochemicals Limited [2023 (6) TMI- 1192 -CESTAT Kolkata] o Lawkim Ltd. [2007 (218) ELT 142 (Tr- Mumbai)] o Zetadel Technologies Private Limited [2023(9) TMI 804- CESTAT Kolkata] • 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 princi....
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....ELT 232 (Tri- Bang)] o Haldia Petrochemicals Limited [2023 (6) TMI- 1192 -CESTAT Kolkata] o Lawkim Ltd. 2007 (218) ELT 142 (Tr- Mumbai)] o Zetadel Technologies Private Limited [2023(9) TMI 804- CESTAT Kolkata] • The unit has been audited in the past, but no objection was raised in the earlier audit- All facts were in the knowledge of the department The department had conducted audit of the appellant's records for the financial year 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 Impugn....
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....osable. • The impugned order is vague and has been passed eyond the scope of the show cause notice. It is submitted that the Show Cause Notice was issued on the basis that the party had contravened Rule 6 & Rule 10A of the Central Excise valuation (Determination of Price of Excisable Goods) Rules, 2000. However, the Ld. Commissioner in the impugned order, has relied on Rule 8 and Rule 11 in order to calculate the assessable value. This a situation is not sustainable as it is simply beyond the scope of show cause notice, hence the impugned order is liable to set aside on this ground only. Reliance is placed 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....
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....s appropriate, of the following goods and services, whether supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale of such goods, to the extent that such value has not been included in the price actually paid or payable, shall be treated to be the amount of money value of additional consideration flowing directly or indirectly from the buyer to the assessee in relation to sale of the goods being valued and aggregated accordingly, namely:- i) value of materials, components, parts and similar items relatable to such goods; ii) value of tools. dies, moulds, drawings, blue prints, technical maps and charts and similar items used in the production of such goods. iii) value of material consumed, including packaging 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....
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.... their own inputs. While clearing the product so made, Central excise duty is being paid by the party on the cost of their own inputs used and job charges and the value of the inputs supplied free of cost by the original manufacturer is not being included in the assessable value for the payment of duty. The transaction between the party and the original manufacturer has been alleged to be sale and so it has been stated that the value of the goods sold has to be arrived based on the transaction value plus the value of the material supplied free of cost by the principal manufacturer. So the party were required to add the value of material supplied free of cost by the principal manufacturer while assessing the value of the final product and pay differential central excise duty along with interest. Further Board's Circular No.643/34/2002-CX.dated 1st 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 wh....
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....ctured on job-work basis, assessable value would be the job charges (including the profit of the job- worker if already not included in the job-charges) plus the cost of the materials used in the manufacture of the item (including the cost of the materials supplied free of cost to the job- worker Iin the instant case, the party intentionally has not included the cost of materials supplied free of cost by the principal manufacturer in their assessable value. Accordingly, hold that the cost of the materials supplied free of cost by the principal manufacturer to the job-worker is includable in the their assessable value and the party is liable to pay the Central Excise duty leviable thereon under Section 3 of the Central Excise Act 1944 read with Rule 6 and Rule 10 A of Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000. Further, I find that the party failed 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 Ce....
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....he amounts of dues confirmed as above amounting to Rs 71,80,964.00/- under Section 11 AA / AB of the Act ibid. As regards the imposition of penalty, I would like to reproduce the relevant provisions of Section 11AC of the Central Excise Act 1944, as under: Section 11AC- Penalty for short levy or non levy of duty in certain cases - Where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded by reasons of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made there-under with intent to evade payment of duty, the person who is liable to pay duty as determined under sub section (2) of Section 11A, shall also be liable to pay a penalty equal to the duty so determined. From above, I find that the imposition of penalty under Section 11AC has rightly been proposed 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 Cent....
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....SCC 491] observing as follow: 9. The object and purpose of pleadings and issues is to ensure that the litigants come to trial with all issues clearly defined and to prevent cases being expanded or grounds being shifted during trial. Its object is also to ensure that each side is fully alive to the questions that are likely to be raised or considered so that they may have an opportunity of placing the relevant evidence appropriate to the issues before the court for its consideration. This Court has repeatedly held that the pleadings are meant to give to each side intimation of the case of the other so that it may be met, to enable courts to determine what is really at issue between the parties, and to prevent any deviation from the course which litigation on particular causes must take. 10. The object of issues is to identify from the pleadings the questions or points required to be decided by the courts so as to enable parties 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 reli....
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....ution Bench of this Court in Bhagwati Prasad vs. Shri Chandramaul - AIR 1966 SC 735 : "If a plea is not specifically made and yet it is covered by an issue by implication, and the parties knew that the said plea was involved in the trial, then the mere fact that the plea was not expressly taken in the pleadings would not necessarily disentitle a party from relying upon if it is satisfactorily proved by evidence. The general rule no doubt is that the relief should be founded on pleadings made by the parties. But where the substantial matter relating to the title of both parties to the suit was touched, tough indirectly or even obscurely in the issues, and evidence has been led about them then the argument that a particular matter was not expressly taken in the pleadings would be purely formal and technical and cannot succeed in every case. What the Court has to consider in dealing with such an objection is : did the parties know that the matter in question was 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 i....
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....roceed on the basis that such case was at issue and had led evidence thereon. As the very requirements indicate, this should be only in exceptional cases where the court is fully satisfied that the pleadings and issues generally cover the case subsequently put forward and that the parties being conscious of the issue, had led evidence on such issue. But where the court is not satisfied that such case was at issue, the question of resorting to the exception to the general rule does not arise. The principles laid down in Bhagwati Prasad and Ram Sarup Gupta (supra) referred to above and several other decisions of this Court following the same cannot be construed as diluting the well settled principle that without pleadings and issues, evidence cannot be considered to make out a new case which is not pleaded. Another aspect to be noticed, is that the court can consider such a case not specifically pleaded, only when one of the parties raises the same at the stage of arguments by contending 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 conten....
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....nsidered in detail in Empire Industries case [1985 (1) Supp. SCR 293 at 327] wherein it was held: "When the textile fabrics are subjected to the processes like bleaching, dyeing and printing etc. by independent processes, whether on their own account or on job charges basis, the value of the purposes of assessment under Section 4 of the Central Excise Act will not be the processing charges alone but the intrinsic value of the processed fabrics which is the price at which such fabrics are sold for the first time in the wholesale market. That is the effect of Section 4 of the Act. The value would naturally include the value of grey fabrics supplied to the independent processors for the processing. However, excise duty, if any, paid on the grey fabrics will be given proforma credit to the independent processors to be utilised for the payment on the processed fabrics in accordance with the Rules 56A or 96 D of the Central Excise Rules, as the case may be." Even the Referring Bench did not doubt the 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 conten....
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....ts pertaining to the sale transactions effected by the manufacturer but to those pertaining to the subsequent sale transactions effected by the wholesale buyers in favour of other dealers." (Emphasis Supplied) The principles for the determination of assessable-value are laid down under Section 4 of the Act. Section 4 of the „Central Excise Act‟ envisages that the value of an article for the purposes of duty shall be deemed to be; (a) The wholesale cash price for which an article of the like kind and quality was sold or was capable of being sold at the time of removal of the article from the factory or premises of manufacture for delivery at the place of manufacture or; (b) Where such price was not ascertainable, the price at which an article of the like kind and quality was sold or capable of being sold at the time of removal of the article chargeable with duty. The nature of the excise duty is not to be confused with, or tested with reference to, the measure by which the tax is assessed. The standard adopted as the measure of assessment may throw light on the nature of the levy but is not determinative of it. When a statutory measure for assessment of....
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....rocedural formalities under the Central Excises and Salt Act, 1944 (1 of 1944) and the rules made thereunder, in respect of the goods manufactured on behalf of the said manufacturer and, in order to enable the determination of value of the said goods under Section 4 of the said Act, to furnish information relating to the price at which the said manufacturer is selling the said goods and the person so authorised agrees to discharge all liabilities under the said Act and the rules made thereunder." 31. On a consideration of the matter, the view taken in the matter in the Empire Industries case does not call for reconsideration. Contention (e) is also held and answered against the petitioner. 4.6 In case of Pawan Biscuits Co. (Pvt.) Ltd [2000 (120) E.L.T 24 (S.C.)], Hon'ble Supreme Court re-iterated the above principles and held as follows: 16. The present case is similar to Ujagar Print's case. In Ujagar Prints' case, it was the grey cloth which was given to the processor whereas in the present case it was the raw material for the manufacture of biscuits given to the appellant. After the biscuits are made, they are given back to or are delivered under the instruc....
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....hat as the processor (the respondent No.1 in this case) is not independent of the merchant manufacturer or trader, the ratio of M/s. Ujagar Prints III would not apply. In Pawan Biscuits although no conclusion from the facts has been recorded, it is clear that it was the facts which induced the Court to come to the conclusion that the relationship between the assessee and M/s. Britannia Industries Limited was that of an independent processor and a merchant manufacturer and that M/s. Ujagar Prints II and III were factually on all fours. The decision therefore does not take us nearer to a solution of the dispute raised by the appellant. 21. The contention of the respondents is that neither the show cause notice nor the Commissioner in his order proceeded on the basis that Section 4(1)(a) of the Act applied but that they had applied Section 4(1)(b) and the Valuation Rules. It is their submission that the concept of deemed sale at the processors factory introduced by M/s. Ujagar Prints III, does not strictly fall with in Valuation Rules 4 or 5. They urged, and the Tribunals view was, that M/s. Ujagar Prints III applied the procedure prescribed in Rule 6(b)(ii). As we have seen ....
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....urer and a trader. If the transaction is between related persons, the profit would not be "normally earned" within the meaning of Rule 6(b)(ii). If it is established that the dealings were with related persons of the manufacturer the sale of the processed fabrics would not be limited to the formula prescribed by Ujagar Prints III but would be subject to excise duty under the principles enunciated in Empire Industries as affirmed in Ujagar Prints II, incorporating the arms length principle." 4.8 The entire gamut of arguments as advanced by the appellant were considered by the larger bench in case of THERMAX BABCOCK & WILCOX LTD. [2018 (364) E.L.T. 945 (Tri. - LB)]. Larger bench of tribunal held as follows: 7. The fact that M/s. Thermax Babcock was principal manufacturer who removed inputs to M/s. Thermax (job worker) for manufacturing of intermediate goods i.e. boiler parts which were to be used by the principal manufacturer in the manufacture of final product remained undisputed. M/s. Thermax as a job worker manufactured boiler parts for M/s. Thermax Babcock using the inputs supplied to it and cleared the same back to M/s. Thermax Babcock who used such intermediate good....
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....necessary in the public interest so to do, it may, by notification in the Official Gazette exempt generally either absolutely or subject to such conditions (to be fulfilled before or after removal) as may be specified in the notification, excisable goods of any specified description from the whole or any part of the duty of excise leviable thereon : Provided that, unless specifically provided in such notification, no exemption therein shall apply to excisable goods which are produced or manufactured - (i) in a [free trade zone [or a special economic zone]] and brought to any other place in India; or (ii) by a hundred per cent export-oriented undertaking and (ii) [brought to any place in India]. Explanation. - In this proviso, ["free trade zone", ["special economic zone"]] and hundred per cent export-oriented undertaking" shall have the same meanings as in Explanation 2 to sub-section (1) of Section 3. [(1A) For the removal of doubts, it is hereby declared that where an exemption under sub-section (1) in respect of any excisable goods from the whole of the duty of excise leviable there on has been granted absolutely, the manufacturer of s....
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....section.] (5) Every notification issued under sub-section (1) or subsection (2A) shall, unless otherwise provided, come into force on the date of its issue by the Central Government for publication in the Official Gazette.] 7.3 Cenvat Credit Rules, 2000 and 2002 Rules were framed under Section 37 of the Central Excise Act and Finance Act, 1994. That does not vest any power to grant exemption from payment of duty. Thus the applicability of Rules 4(5) and (6) to grant exemption to the assessee i.e. job worker from payment of duty is inconceivable. 7.4 An exemption to job worker is provided only in terms of Notification No. 214/86, dated 25-3-1986 issued under Rule 8(1) of Central Excise Rules, 1944 in terms of Section 5A. The Notification No. 214/86-C.E., dated 25-3-1986 which provides exemption to the job worker from payment of duty on goods received from principal manufacturer reads as under : Specified goods manufactured in a factory as a job work and used in the manufacture of final products In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts goods speci....
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....t payment of duty (i) under bond for export; or - (ii) to a unit in a free trade zone or to a hundred per cent. export-oriented undertaking or to a unit in an Electronic Hardware Technology Park or Software Technology Parks or supplied to the United Nations or an international organisation for their official use or supplied to projects funded by them, on which exemption of duty is available under notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 108/95-Central Excises, dated the 28th August, 1995; or". (c) removed on payment of duty for home consumption from his factory, or (d) used in the manufacture of goods of the description specified in column (1) of the table hereto annexed by another job worker for further used in any of the manner provided in clause (a), (b) and (c) as above. (ii) the said supplier produces evidence that the said goods have been used or removed in the manner prescribed above; and (iii) the said supplier undertakes the responsibilities of discharging the liabilities in respect of Central Excise Duty leviable on the final products. Explanation I. - For....
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....rked goods were exempted from duty on the clearance thereof at the job worker's end, by virtue of Rule 4(5)(a) of Cenvat Credit Rules, 2001 and 2002 relying upon Rule 4(6) of the said Rules, appellant claimed that the principal manufacturer can also remove the goods from the job worker premises either on payment of duty or for export, under Bond. The Rule 4(5)(a) and Rule 4(6) of Cenvat Credit Rules, 2001 and 2002 relied upon by the Appellant in support of their contention read as under : Rule 4(5)(a) - The CENVAT credit on inputs shall be allowed even if any inputs as such or after being partially processed are sent to a job worker for further processing, testing, repairing, re-conditioning or any other purpose, and it is established from the records, challans or memos or any other document produced by the assessee taking the CENVAT credit that the goods are received back in the factory within one hundred and eighty days, the manufacturer shall pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods by debiting the CENVAT credit or otherwise, but the manufacturer can take the CENVAT credit again when the inputs or capital goods are receiv....
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....redit can be allowed to a principal manufacturer and it is not a statutory provision to grant exemption from payment of duty to the manufacturer and in the present case, the job worker. 7.6 The job worker being the manufacturer of goods is liable to pay duty on goods manufactured by him albeit on job work. The ownership of the goods is immaterial for the purpose of levy of duty and thus any person who has undertaken the activity of manufacture is liable to pay duty. In order to save the job worker from payment of duty the principal manufacturer has to own the liability to pay such duty. It is only by virtue of the Notification No. 214/86-C.E., dated 25-3-1986 that the liability of the job worker to pay duty is transferred to the principal manufacturer who undertakes to pay duty. 7.7 The intention of enactment of Notification (supra) was to shift the liability of payment of duty from job worker to the principal manufacturer under certain conditions as provided in the said notification. There is no blanket machinery provisions in the Central Excise law under which the liability to pay duty is transferred from the job work manufacturer to another person i.e. principa....
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.... may allow in this behalf, for - (i) further use in the manufacture of the final product; or (ii) removing after payment of duty for home consumption; or (iii) removing the same without payment of duty under bond for export." Since the rule provided for exemption where the principal manufacturer pays duty on finished goods and therefore it was held that no duty is liable to be paid by the job worker. The job worker was exempted from payment of duty in case where the goods arising out of job work were to be used by the principal manufacturer either in the manufacture of goods on which duty was paid by him or were to be cleared as such on payment of duty. The said situation given in Rule (supra) cannot be equated with the present situation as Rule 4(5)(a) not being concerned with payment of duty but only limited to sending of cenvated inputs to the job worker. 7.10 In the present case the fact remains is that neither the goods after job work were cleared as such on payment of duty nor were used in manufacture of dutiable final products by the principal manufacturer. Hence the duty liability would be on the real manufacturer of goods i.e. t....
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....unal is as under : "6. It is thus, obvious that as far as the duty liability of a job worker in terms of Rule 57F(4) of Central Excise Rules, 1944 is concerned, it is settled upto the level of Supreme Court that the job worker was not required to pay duty. We have reproduced above the provisions of Rule 57F(4) of Central Excise Rules, 1944 and the provisions of Rule 4(5)(a) of the Cenvat Credit Rules, 2004 and have carefully perused the same. The language in both these Rules gives no scope to infer that if the job worker was not required to pay duty in terms of Rule 57F(4) it could be required to pay duty in terms of Rule 4(5)(a) because the conditions of Rule 57F(4) of Central Excise Rules, 1944 were stringent compared to the conditions of Rule 4(5)(a) of the Cenvat Credit Rules inasmuch as Rule 57F(4) categorically required the principal manufacturer to use the goods received from the job worker for further use in the manufacture of the final product or removing after payment of duty for home consumption or removing the same without payment of duty for export while Rule 4(5)(a) does not say so expressly though it is implicit therein. Thus, we are of the view that for the....
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....ant also relied upon the judgment of Hon'ble Apex Court in case of M/s. International Auto Ltd. v. CCE, Bihar - 2005 (183) E.L.T. 293 (S.C.). In the said case the dispute related to valuation of goods for the purpose of levy of duty at the job worker's end. The controversy was not related to liability of duty of job worker. It is undisputed in the present case that the principal manufacturer was not paying duty on removal of final products and had also not opted to avail the benefit of Notification No. 214/86-C.E. Hence the liability is on the manufacturer of intermediate product, i.e. job worker in the present case. 7.15 The reliance placed upon the Circular No. 306/22/97/-CX, dated 20-3-1997 is also misplaced since the circular was with reference to the situation upon eligibility of the job worker to claim credit where no duty was paid by them. However the facts of the present case are different as it deals with the situation as to who should be liable to pay duty when the principal manufacturer is not discharging duty either on job work goods or on final products in which such job work goods are consumed. In such case the responsibility lies to the job worker who is the....
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....scharging the liabilities in respect of duty leviable on the finished products. We find that no evidence has been brought on record by the Appellants to prove that the supplier of the raw-material had supplied the materials to them under the provisions of Notification No. 214/86. In view of absence of any material to this effect, it is not open to the Appellants to claim that they were working under the provisions of Notification No. 214/86. The copies of challans brought on record by the Appellants only refer to the movement of excisable goods under Rule 57F(2). In view of this, the reliance placed by the Appellants on the observation of the Tribunal in respect of Notification No. 214/86 in the remand order is not tenable. We also observe that the Tribunal directed the Adjudicating Authority to decide the matter in the light of the observations and also according to the law. 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. Para 2 of the Notification No. 214/86 speaks of the liability of the supplier for discharging the duty leviable on the finished products and not on the goods ma....
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....er did not pay duty and did not follow the procedure and conditions of Notification No. 214/86-C.E. supra, the job worker as a manufacturer is liable to duty on the job worked goods. 8. As per above discussion, we hold that the job worker M/s. Thermax being manufacturer of excisable goods is liable to pay duty on the intermediate goods manufactured by him on job work basis which supplied to their principal M/s. Thermax Babcock. The question referred to this larger bench is answered accordingly. Registry is directed to place the appeals before the referral bench for appropriate orders." 4.9 However we find that Hon'ble Supreme Court has in case of International Auto [2005 (183) E.L.T. 239 (S.C.)] stated as follows: "5. Before us learned Counsel appearing on behalf of the appellant has submitted that the entire transaction between the TELCO and the appellant was covered by Rule 57F(2)(b) of the Central Excise Rules, 1944. Under these Rules the assessee is the manufacturer of the final product, in this case, excavators. The manufacturer of the final product is permitted to remove inputs to a place outside the factory for the purpose of manufacture of intermediate ....
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.... was the final product, namely, wagons. 7. In this appeal as we have already noted, the final product was the excavator. According to the Modvat scheme, it is the Modvat of such final product which would have to include the cost of the inputs and in respect of which Modvat credit could be taken at the time of clearance of the final product. The Tribunal having misconstrued the provisions of Rule 57F(2)(b), its decision cannot stand. The decision of the Tribunal is accordingly set aside and the appeal is allowed." 4.10 As per Section 2 (h) of the Central Excise Act, 1944 "sale and purchase" has been defined stating as follows: "(h) "sale" and "purchase", with their grammatical variations and cognate expressions, mean any transfer of the possession of goods by one person to another in the ordinary course of trade or business for cash or deferred payment or other valuable consideration;" 4.11 Rule 10 A was inserted vide Notification No 9/2007-CE (NT) dated 01.03.2007 with effect from 01.04.2007 in Central Excise Valuation (Determination of Price Excisable Goods) Rules, 2007, to provide definiteness to the manner of valuation of the goods manufactured and cleare....
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....of the said goods and procedure for maintenance of records and the return of said goods. This Rule was interpreted by the tribunal in case of Federal Mogul Goetze India Ltd. [2015 (318) E.L.T. 340 (Tri. - Bang.)] explaining the concepts of job work and various notifications and provisions of CENVAT Credit Rules, 2004 observed a s follows: 8.1 It would be appropriate to recall the concept of job work and the legal implications under the Excise law. 8.2 The practice of getting certain processes done by job worker and getting goods manufactured on job work basis is a widely prevalent practice in the manufacturing sector. A person who is sending material to a job worker is being referred to "as principal manufacturer" and the person who undertakes the processes or manufacture the product for job charges is treated as a "job worker". The activities/processes undertaken by the job worker may amount to manufacture as per Central Excise Law or it may not. The job worker, in addition to using the material supplied by the principal manufacturer, may use his own material for undertaking the job work and the job charges collected by him will, obviously, include the cost of hi....
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....ility in respect of goods manufactured on job work basis are sought to be treated to be same as those applicable to the goods manufactured by the principal manufacturer. 9.1 Undisputedly the manufacturer-appellant has procured duty paid piston rings in coil form and taken Cenvat credit of the duty paid on the said piston rings. The said raw material has been sent to the job worker-appellant under material movement challans for the purpose of chrome plating. We agree with the findings of the Commissioner that the activities of chrome plating does not amount to manufacture in the hands of the job worker-appellant and, therefore, the chrome plated piston rings are not „excisable goods‟. 9.2 It is not in dispute that the manufacturer-appellant having taken Cenvat credit can send the materials in terms of Rule 4(5)(a) of the Cenvat Credit Rules for the purpose of undertaking certain processes whether such processes amount to manufacture or not. Therefore, the job worker appellant could have undertaken the job work of chrome plating and returned the job-worked material to the manufacturer-appellant without payment of duty in terms of Rule 4(5)(a) of the Cenv....
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....the job-worked goods back to the manufacturer-appellant completes the obligation on the part of the job worker. If the activities of the job worker amount to manufacture, then the liability to duty is on the job worker who is the manufacturer. Even in such a situation, the job worker is permitted to remove without payment of duty provided the raw material supplier (in this case manufacturer-appellant) undertakes to pay the duty involved. To enable such clearance without payment of duty Notification 214/86 comes to the rescue of the job worker. 9.7 The job worker is also entitled to take credit of duty paid on inputs and service tax paid on input services utilized in undertaking the job work activities. This is permissible in the light of decision of the Larger Bench of the Tribunal in the case of Sterlite Industries (I) Ltd. v. CCE, Pune - 2005 (183) E.L.T. 353 (Tri.-LB). In the said decision, the Tribunal considered the interplay of Rule 57F and Rule 57C of the erstwhile Central Excise Rules. In the said case, the principal manufacturer who has taken credit on inputs has sent the inputs under 57F to the job worker for certain processes and the job worker who has used inpu....
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....ification No 214/86-CE subject to following the conditions laid down in the said exemption notification. Apparently the prime manufacturer who has provided the goods to the appellant for job work has not followed the procedure as prescribed by the said notification. Hon'ble Supreme Court has in case of Dilip Kumar & Company [2018 (361) E.L.T. 577 (S.C.)] specifically held as follows: "27. Now coming to the other aspect, as we presently discuss, even with regard to exemption clauses or exemption notifications issued under a taxing statute, this Court in some cases has taken the view that the ambiguity in an exemption notification should be construed in favour of the subject. In subsequent cases, this Court diluted the principle saying that mandatory requirements of exemption clause should be interpreted strictly and the directory conditions of such exemption notification can be condoned if there is sufficient compliance with the main requirements. This, however, did not in any manner tinker with the view that an ambiguous exemption clause should be interpreted favouring the revenue. Here again this Court applied different tests when considering the ambiguity of the exemptio....
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.... if captively consumed for the manufacture of final product on the ground that the records kept by it at the recipient end would indicate its "intended use" and "substantial compliance" with procedure set out in Chapter 10 of the Central Excise Rules, 1944, for consideration? The Constitution Bench answering the said question concluded that a manufacturer qualified to seek exemption was required to comply with the preconditions for claiming exemption and therefore is not exempt or absolved from following the statutory requirements as contained in the Rules. The Constitution Bench then considered and reiterated the settled principles qua the test of construction of exemption clause, the mandatory requirements to be complied with and the distinction between the eligibility criteria with reference to the conditions which need to be strictly complied with and the conditions which need to be substantially complied with. The Constitution Bench followed the ratio in Hansraj Gordhandas case (supra), to reiterate the law on the aspect of interpretation of exemption clause in para 29 as follows - "The law is well-settled that a person who claims exemption or concession has to establ....
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....s enacted and not a mirror image type of strict compliance. Substantial compliance means "actual compliance in respect to the substance essential to every reasonable objective of the statute" and the Court should determine whether the statute has been followed sufficiently so as to carry out the intent of the statute and accomplish the reasonable objectives for which it was passed. 33. A fiscal statute generally seeks to preserve the need to comply strictly with regulatory requirements that are important, especially when a party seeks the benefits of an exemption clause that are important. Substantial compliance with an enactment is insisted, where mandatory and directory requirements are lumped together, for in such a case, if mandatory requirements are complied with, it will be proper to say that the enactment has been substantially complied with notwithstanding the non-compliance of directory requirements. In cases where substantial compliance has been found, there has been actual compliance with the statute, albeit procedurally faulty. The doctrine of substantial compliance seeks to preserve the need to comply strictly with the conditions or requirements that are impor....
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....e is no implied power of taxation. The tax power must be specifically conferred and it should be strictly in accordance with the power so endowed by the Constitution itself. It is for this reason that the Courts insist upon strict compliance before a State demands and extracts money from its citizens towards various taxes. Any ambiguity in a taxation provision, therefore, is interpreted in favour of the subject/assessee. The statement of law that ambiguity in a taxation statute should be interpreted strictly and in the event of ambiguity the benefit should go to the subject/assessee may warrant visualizing different situations. For instance, if there is ambiguity in the subject of tax, that is to say, who are the persons or things liable to pay tax, and whether the revenue has established conditions before raising and justifying a demand. Similar is the case in roping all persons within the tax net, in which event the State is to prove the liability of the persons, as may arise within the strict language of the law. There cannot be any implied concept either in identifying the subject of the tax or person liable to pay tax. That is why it is often said that subject is not to be tax....
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....ad along with the Act. The notification must be read as a whole in the context of the other relevant provisions. When a notification is issued in accordance with power conferred by the statute, it has statutory force and validity and, therefore, the exemption under the notification is as if it were contained in the Act itself. See in this connection the observations of this Court in Orient Weaving Mills (P) Ltd. v. Union of India, 1962 Supp 3 SCR 481 = AIR 1963 SC 98. See also Kailash Nath v. State of U.P., AIR 1957 SC 790. The principle is well settled that when two views of a notification are possible, it should be construed in favour of the subject as notification is part of a fiscal enactment. But in this connection, it is well to remember the observations of the Judicial Committee in Coroline M. Armytage v. Frederick Wilkinson, (1878) 3 AC 355, that it is only, however, in the event of there being a real difficulty in ascertaining the meaning of a particular enactment that the question of strictness or of liberality of construction arises. The Judicial Committee reiterated in the said decision at page 369 of the report that in a taxing Act provisions enacting an exception to t....
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....interpreting the applicability of exemption clause strictly, the Court may construe the notification by giving full play bestowing wider and liberal construction. The ratio of Parle Exports case (supra) deduced as follows : "Do not extend or widen the ambit at stage of applicability. But once that hurdle is crossed, construe it liberally". 47. We do not find any strong and compelling reasons to differ, taking a contra view, from this. We respectfully record our concurrence to this view which has been subsequently, elaborated by the Constitution Bench in Hari Chand case (supra). 48. The next authority, which needs to be referred is the case in Mangalore Chemicals (supra). As we have already made reference to the same earlier, repetition of the same is not necessary. From the above decisions, the following position of law would, therefore, clear. Exemptions from taxation have tendency to increase the burden on the other unexempted class of taxpayers. A person claiming exemption, therefore, has to establish that his case squarely falls within the exemption notification, and while doing so, a notification should be construed against the subject in case of amb....
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....ch require substantial compliance to be entitled for exemption. We are pointing out this aspect to dispel any doubt about the legal position as explored in this decision. As already concluded in para 50 above, we may reiterate that we are only concerned in this case with a situation where there is ambiguity in an exemption notification or exemption clause, in which event the benefit of such ambiguity cannot be extended to the subject/assessee by applying the principle that an obscure and/or ambiguity or doubtful fiscal statute must receive a construction favouring the assessee. Both the situations are different and while considering an exemption notification, the distinction cannot be ignored. 52. To sum up, we answer the reference holding as under- (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. ..." Thus in absence of any specific compliance with the conditions and procedure laid down as per the Notification 214/86-CE, the benefit of same cannot be allowed as claimed by the ....
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....urt in Cherukuri Mani v. Chief Secretary, Government of Andhra Pradesh & Ors. [(2015) 13 SCC 722] wherein this Court held as under: "14. Where the law prescribes a thing to be done in a particular manner following a particular procedure, it shall be done in the same manner following the provisions of law, without deviating from the prescribed procedure............." 17. Similarly, this Court in Municipal Corporation of Greater Mumbai (MCGM) v. Abhilash Lal & Ors. [(2020) 13 SCC 234] and OPTO Circuit India Limited v. Axis Bank & Ors. [(2021) 6 SCC 707] has followed the said principle...." 4.18 Appellant in the present case have determined the value of job worked material by excluding the value of the material supplied to them for job work by the prime manufacturer. The have determined the value on the basis of the value of the material procured by them on their own account and the job charges. The manner in which the value has been determined goes contrary to the decision of Hon'ble Apex Court in case of Ujaggar Prints and other similar decisions read with the provision of rule 6 & Rule 10A of Central Excise valuation (Determination of Price of Excisable Goods) ....
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....e can find in his favour in taxing Acts. In so doing he neither comes under liability nor incurs blame." .... The march of the law against tax avoidance schemes continued and came a significant departure from the West minister and the Fisher Executors principle. In W. l. Ramsay v. Inland Revenue Commissioners [(1982] AB 300], the House of Lords had to consider a scheme of tax avoidance which consisted of a series or a combination of transactions each of which was individually genuine but the result of all of which was* an avoidance of tax. Lord Wilberforce, with great force, observed, "Given that a document or transaction is genuine, the court cannot go behind it to some supposed underlying substance. This is the well-known principle of Inland Revenue Commissioners v. Duke of. West minister. This is a cardinal principle but it must not be overstated or overextended. While obliging the court to accept documents or transactions, found to be genuine, as such, it does not compel the court to look at a document or a transaction in blinkers, isolated from any context to which it properly belongs. If it can be seen that a document or transaction was intended to ....
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....n). Further it was pointed out that the capital gains tax legislation (starting with the Finance Act 1965) does not contain any provision corresponding to section 460. The intention should be deduced therefore, it was said, to leave capital gains tax * to be dealt with by "hole and plug" methods: that such schemes as the present could be so dealt with has been confirmed by later legislation as to "value shifting": Capital Gains Tax Act 1979, section 25 et seq. These arguments merit serious consideration. In substance they appealed to Barwick C.J. in the recent case of Federal Commissioner of Taxation v. Wes traders Pty. Ltd. [1980] 30 A.L.R. 353, 354-355." "I have a full respect for the principles which have been stated but I do not consider that they should exclude the approach for which the Crown contends. That does not introduce a new principle: it would be to apply to new and sophisticated legal devices the undoubted power and duty of the courts to determine their nature in law and to relate them to existing legislation. While the techniques of tax avoidance progress and are technically improved, the courts are not obliged to stand still. *Such immobility must result e....
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....icial attitude towards tax avoidance has changed and the smile, cynical or even affectionate though it might have been at one time, has now frozen into a deep frown. The courts are now concerning themselves not merely with the genuineness of a transaction, but with the intended effect of it for fiscal purposes. No one can now get away with a tax avoidance project with the mere statement that there is nothing illegal about it. Some years ago, a diverting attempt was made by a Correspondent to the London 'Times' to defend tax avoidance. He said, "The taxpayer is morally bound to obey the law, but is not bound beyond the law, for apart from the law taxation would be blackmail or racketeering. There is not behind taxing laws, as there is behind laws against crime, an in dependent moral obligation. When therefore the tax-payer has obeyed the law, he had done all that morality requires" He had further said, "It is said that by avoiding a tax he throws a load on to some other taxpayer. But this is not quite accurate, for - the deficiency might be met by reducing expenditure.. is it not a good thing that there should be this last lawful remedy against oppressive taxation b....
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....heat craft in 18 Modern Law Review 209) by some of the best brains in the country being involved in the perpetual war waged between the tax-avoider and his expert team of advisers, lawyers and accountants on one side and the tax-gatherer and his perhaps not so skilful, advisers on the other side. Then again there is the 'sense of injustice and inequality which tax avoidance arouses in the breasts of those who are unwilling or unable to profit by it'. Last but not the least is the ethics (to be precise, the lack of it) of transferring the burden of tax liability to the shoulders of the guideless good citizens from those of the 'artful dodgers'. It may, indeed, be difficult for lesser mortals to attain the state of mind of Mr. Justice Holmes, who said, "Taxes are what we pay for civilized society. I like to pay taxes. With them I buy civilization." But, surely, it is high time for the judiciary in India too to part its ways from the principle of West minister and the alluring logic of tax avoidance. We now live In a welfare state whose financial needs, if backed by the law, have to be respected and met. We must recognise that there is behind taxation laws as much mora....