Madras High Court
The Commissioner Of Central Excise vs M/S. Whirlpool Of India Ltd on 28 August, 2014
Bench: R.Sudhakar, G.M.Akbar Ali
In the High Court of Judicature at Madras
Dated: 28.08.2014
Coram
The Honourable Mr.JUSTICE R.SUDHAKAR
and
The Honourable Mr.JUSTICE G.M.AKBAR ALI
Civil Miscellaneous Appeal Nos.2682, 2877, 2396 and 3544 of 2005
& connected miscellaneous petitions
The Commissioner of Central Excise,
Pondicherry Commisionerate
No.1, Goubert Avenue, Beach Road,
Pondicherry - 605 001. .... Appellant in the above C.M.As
Vs.
1. M/s. Whirlpool of India Ltd.,
Thirubhuvanai
Pondicherry- 605 107.
2. Customs, Excise and Service Tax
Appellate Tribunal,
West Block No.2, R.K.Puram,
New Delhi - 110 0066 .... Respondents in the above C.M.As
APPEALs under Section 35-G of the Central Excise Act against the common final order dated 26.8.2003 made in Final Order No.A/511-514/03 NBC on the file of the Customs, Excise and Service Tax Appellate Tribunal, New Delhi.
For Appellant : Mr.Thirumoorthy
for M/s.Kumar Paul Chopda
Standing counsel
For Respondent: Mr.R.Parthasarathy
for M/s.Lakshmi Kumaran
-------
C O M M O N J U D G M E N T
(Delivered by R.SUDHAKAR,J.) The above Civil Miscellaneous Appeals filed by the Revenue as against the order of the Customs, Excise and Service Tax Appellate Tribunal, New Delhi were admitted by this Court on the following substantial questions of law:
C.M.A.No.2682 of 2005:
"(i) Whether the ruling of Honourable Supreme Court in the case of Prestige (India) Ltd., Vs. Commissioner of Central Excise, (1994 73 ELT 497 SC), that where the raw material is not supplied by the customer, there is no question of such manufacturer being termed as job worker, will not be applicable for the interpretation of sub rule 8 of Rule 57 S of Central Excise Rules, 1944?
(ii) The assessee avails credit of duty involved on mould and dies and clear them to the consignee for manufacture of parts of washing machines without payment of duty. The consignee sends back the duty paid parts manufactured to the assessee, which already includes the amortized value of the moulds and dies, involved for the manufacture. Thus, there is double Modvat benefit to the assessee, which is violative of CENVAT/MODVAT provisions. Is it correct in law to allow double Modvat benefits to the assessee?"
C.M.A.No.2396 of 2005:
(i) Whether the Tribunal's finding that it is not necessary for the purpose of sub Rule (8) of Rule 57S of Central Excise Rules, 1944 that only those person will be termed as job worker to whom the raw materials are supplied to, is correct in law?
(ii) The assessee avails credit of duty involved on mould and dies and clear them to the consignee for manufacture of parts of washing machines without payment of duty. The consignee sends back the duty paid parts manufactured to the assessee, which already includes the amortized value of the moulds and dies, involved for the manufacture. Thus, there is double Modvat benefit to the assesee, which is violative of CENVAT/MODVAT provisions. Is it correct in law to allow double Modvat benefit to the assessee?
C.M.A.Nos.2877 & 3544 of 2005:
i) Whether the Tribunal's finding that it is not necessary for the purpose of sub Rule (8) of Rule 57S of Central Excise Rules, 1944 that only those person will be termed as job worker to whom the raw materials are supplied to, is correct in law?
ii) Whether the ruling of Honourable Supreme Court in the case of Prestige (India) Ltd., Vs. Commissioner of Central Excise, (1994 73 ELT 497 SC), that where the raw material is not supplied by the customer, there is no question of such manufacturer being termed as job worker, will not be applicable for the interpretation of sub rule 8 of Rule 57 S of Central Excise Rules, 1944?
iii) The assessee avails credit of duty involved on mould and dies and clear them to the consignee for manufacture of parts of washing machines without payment of duty. The consignee sends back the duty paid parts manufactured to the assessee, which already includes the amortized value of the moulds and dies, involved for the manufacture. Thus, there is double Modvat benefit to the assesee, which is violative of CENVAT/MODVAT provisions. Is it correct in law to allow double Modvat benefit to the assessee?"
2. The brief facts are as follows:
The respondent/assessee is engaged in the manufacture of washing machines falling under chapter sub-heading 8450.10 of Central Excise Tariff. They availed credit of duty paid on capital goods. The assessee had sent their moulds to their consignees/job workers, namely, (a) M/s.Supreme Industries Ltd., Pondicherry, (b) M/s.Brite Automotive & Plastics Ltd., Pondicherry and (c) M/s.Barani Enterprises, Chennai for the manufacture of washing machine parts by using the moulds supplied by the assessee to the said job worker. The job workers, on their part, used the moulds and dies for manufacture of the parts. The raw material, for manufacture of those parts, was, however, procured by the job worker and after the parts were manufactured, they were cleared and supplied to the assessee on payment of Central Excise duty, payable on those goods. The assessee in this case, while sending the moulds and dies to the job workers invoked the provision of Rule 57S(8) of Central Excise Rules, 1944 and in effect, at the time of removal of moulds and dies, the assessee took permission from the Commissioner, removed the moulds and dies without payment of duty and sent to the job workers for the purpose of production of goods on their behalf and in accordance with the specifications. The Department was of the view that the job workers/consignees were buying the raw materials on their own and manufactured the parts of the washing machine with the help of the moulds and dies supplied by the assessee and therefore, they are the principal manufacturer and the assessee also is a principal manufacturer. The removal of moulds and dies from one principal manufacturer to another principal manufacturer should be done only after reversing the credit taken on the moulds and dies by the assessee. In the present case, this event had not happened and therefore there is a violation of the provisions of the erstwhile Modvat Rules. Accordingly, show cause notice was issued to the assessee in respect of four different periods. The assessee submitted their objection to such demand contending that under Rule 57S(8) of Modvat Credit Rules, (hereinafter referred to as 'Rules') proper permission has been obtained from the jurisdiction Commissioner and there is no need for reversal of credit availed in respect of moulds and dies in a case of transfer of goods under Rule 57S(8) of the Rules to a job worker.
3. The Original Authority relied upon the decision of the Supreme Court in the case of Prestige Engineering (India) Ltd. vs Collector Of Central Excise, Meerut reported in 1994 (73) ELT 365 to hold that where the raw material is not supplied by the customer, there is no question of the person manufacturing goods for the customer being termed as 'job worker'. The Original Authority held that the consignee or the person to whom the moulds and dies were sent for manufacture of parts of washing machine cannot be considered as a job worker and in this case, the duty liability is discharged by the consignee/job worker in their own capacity as a manufacturer and therefore they are not liable to be called as job workers. Accordingly, the benefit given under Rule 57S(8) of Rules was not extended to the assessee and the differential duty was demanded together with penalty. Aggrieved by this, the assessee preferred an appeal before the Commissioner (Appeals), who dismissed the appeal filed by the assessee confirming the order of the Original Authority. The assessee, therefore, filed an appeal before the Tribunal.
4. The Tribunal, while following the decision in the case of Monica Electronics vs Cce reported in 2000 (123) ELT 1047, allowed the appeals filed by the assessee holding as follows:
"4. We have considered the submissions of both the sides. It has not been disputed by the Revenue that the appellants are placing purchase orders on suppliers for manufacturing and supplying various washing machine parts. Thus, the suppliers were manufacturing parts as per the design and specification given by the appellants. It is, thus, apparent that the work of manufacturing parts of washing machines has been assigned to the suppliers on job work basis. As per the short Oxfort Dictionary, 'job work' means work done and paid for by the job; piece work. Mere facts that the suppliers were using their own raw-material for supplying parts of washing machines, cannot take them away from the category of job worker. Sub-rule (8) of Rule 57S of the Central Excise Rules, 1944, clearly provides that a manufacturer may, with the permission of the Commissioner and subject to such terms and conditions and limitation as he may impose, remove the moulds and dies without payment of duty to job worker for the purpose of production of goods on his behalf and according to his specifications. Sub-rule (8) starts with the words "Notwithstanding anything contained in sub-rule (1)" and as such is a non-obstante clause. This rule clearly empowers the appellants to remove the moulds and dies without payment of duty to the premises of job worker for the purpose of production of goods on their behalf and according to their specifications. The Tribunal has already held in a number of decisions starting from M/s.Monica Electronics that it is not necessary for the purpose of sub-rule (8) of Rule 57S that only those persons will be termed as 'job workers' whom the raw-materials are supplied to. Thus, following the ratio of these decisions, we set aside the impugned order and allow all the appeals."
5. Aggrieved by the order of the Tribunal, the Revenue has filed the present Civil Miscellaneous Appeals.
6. Learned Standing Counsel appearing for the Revenue submits the provisions under Rule 57S(8) of the Rules would not apply to the case of the assessee, as the raw materials were not supplied by the assessee to the job worker and the job worker purchased the raw materials from independent source and using the moulds and dies supplied by the assessee, they manufactured and supplied the parts of the washing machine to the assessee. He further submits that the Supreme Court in the case of Prestige Engineering (India) Ltd. vs Collector Of Central Excise, Meerut reported in 1994 (73) ELT 365 held that job work means goods produced out of materials supplied by the customer and the job worker contributes mainly their labour and skill though done with the help of own tools, gadgets or machinery. This ratio was overlooked by the Tribunal. Hence, the order of the Tribunal has to be set aside.
7. Per contra, learned counsel appearing for the assessee submits that the when Rule 57S(8) itself empowers the assessee to remove the moulds and dies without payment of duty with the permission of the jurisdiction Commissioner, the Tribunal is right in granting the benefit to the assessee. Also in the case of Monica Electronics vs Cce reported in 2000 (123) ELT 1047, wherein the Tribunal held that it is not necessary that only those persons will be termed as 'job workers' whom the raw materials are supplied to. The said decision of the Tribunal was accepted by the Department and as against the same, no appeal has been filed. In support of this contention, he relied on the decision reported in 2006 (202) ELT 389 (SC) (Boving Fouress Ltd. V. Commissioner of Central Excise, Chennai) and contended that when the Department has accepted the order of the Tribunal, the Department is not entitled to raise the same point in other case. Hence, the order of the Tribunal may be confirmed.
8. Heard learned counsel appearing for the Revenue and the learned counsel appearing for the assessee and perused the materials placed before this Court.
9. The issue involved in the above appeals revolves around the following two questions of law:
"i) Whether the Tribunal's finding that it is not necessary for the purpose of sub Rule (8) of Rule 57S of Central Excise Rules, 1944 that only those person will be termed as job worker to whom the raw materials are supplied to, is correct in law?
ii) Whether the ruling of Honourable Supreme Court in the case of Prestige (India) Ltd., Vs. Commissioner of Central Excise, (1994 73 ELT 497 SC), that where the raw material is not supplied by the customer, there is no question of such manufacturer being termed as job worker, will not be applicable for the interpretation of sub rule 8 of Rule 57 S of Central Excise Rules, 1944?"
10. Firstly, whether the decision relied on by the Original Authority in the case of Prestige Engineering (India) Ltd. vs Collector Of Central Excise, Meerut reported in 1994 (73) ELT 365 is applicable to the facts of the present case has to be seen.
11. In the case of Prestige Engineering (India) Ltd. vs Collector Of Central Excise, Meerut reported in 1994 (73) ELT 365, the question raised was as to the true meaning and purport of Notification No.119/75-C.E., dated April 30, 1975 issued by the Central Government under Rule 8(1) of the Central Excise Rules, 1944. The said Notification reads as follows:
"NOTIFICATION Exemption to goods produced on the job work basis :- 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 falling under Item No. 68, of the First Schedule to the Central Excise and Salt Act, 1944 (1 of 1944), manufactured in a factory as a job work from so much of the duty of excise leviable thereon as is excess of the duty calculated on the basis of the amount charged for the job work. Explanation:- For the purposes of this notification, the expression 'job work' shall mean such items of work where an article intended to undergo manufacturing process is supplied to the job worker and that article is returned by the job worker to the supplier, after the article has undergone the intended manufacturing process, on charging only for the job work done by him."
12. In that case, the appellant - Prestige Engineering (India) Ltd. had entered into an agreement with M/s.Modipon Limited, where M/s.Modipon was to supply steel pipes from which the appellant- Prestige Engineering (India) Ltd. was to manufacture cops, falling under Tariff item No.68 of the Central Excise Tariff Schedule. M/s.Modipon supplied steel pipes only and the appellant - Prestige Engineering (India) Ltd. purchased centre guide rings and the strengthening rings which were fitted inside the steel pipes to lend them strength. After the rings were so fitted, adopters were fitted on the sides of the cops and thereafter plastic sleeves were fitted on the cylinders of the cops. For the process of fitting the inner rings, strengthening rings and guide rings, appellant got the work done through another unit with the aid of power, as they were carrying out their operations without the aid of power. However, they claimed the benefit of Notification No.119/75, whereby if the notification benefit is given to the appellant - Prestige Engineering (India) Ltd., they would be liable to pay duty only on the value of the job-work undertaken by them. In this regard, the question arose before the Supreme Court was whether the manufacturing process undertaken by the appellant - Prestige Engineering (India) Ltd. was in the nature of 'job work', within the meaning of the Notification. The Supreme Court, while considering as to how the expression ' job work' should be understood for the purpose of the Notification No.119/75, held as follows:
6. So far as the expression "job work" is concerned, it is not defined in the Act but in the Notification itself. The Explanation appended to the Notification defines it for the purposes of the said Notification. It says that job work shall mean "such items of work where an article intended to undergo manufacturing process is supplied to the job worker and that article is returned by the job worker to the supplier, after the article has undergone the intended manufacturing process, on charging only for the job work done by him."
13. The Supreme Court also laid emphasis on the notification and the reason as to why such notification was issued in paragraph 18 of the judgment, which reads as follows:
"It must be remembered that the Notification was issued simultaneously with the introduction of Tariff Item 68 in Schedule-I to the Act and was intended to help those factories undertaking job works, who were charging their customers only for the work done by them. In their hands, the value of the article would be the value of the job-work done by them - and not the total value of the article which would have been the case but for the Notification. According to the restricted view contended for by the Revenue, a tailoring factory stitching clothes out of the cloth supplied or a factory preparing shoes out of material supplied by the customer, in the illustrations given hereinabove, would not qualify for the benefit of the Notification."
14. On facts, the Supreme Court came to the conclusion that the rings and adapters were not supplied by M/s.Modipon. Except the pipes, all other items which go into the manufacture of cops were either purchased or procured by the appellant himself and he manufactures the cops out of them. Hence, the work done by the appellant could not be be characterised as a job-work. If all the requisite rings, adopters and sleeves had also been supplied by M/s.Modipon, it could probably have been said that the appellant's work was in the nature of job-work. Therefore, while strictly interpreting the exemption Notification No.119/75, the Supreme Court held that unless the raw materials were supplied, it will not come within the definition of 'job work'. As a result, the job workers were liable to pay duty on the inputs as well as the steel pipes supplied by Modipon and his job charges as one component.
15. In the present case, we find that the moulds and dies were supplied by the assessee to the job worker and the job worker used their own raw materials along with the moulds and dies supplied by the assessee in the manufacturing of parts according to the design and specification of the assessee. After the parts are so manufactured, central excise duty is paid on the value of raw material, the amortised value of moulds and dies and the job charges and thereafter, the goods are cleared to the assessee for use in the manufacture of washing machines. It is another matter that the assessee claims credit on the duty paid component of the manufactured parts supplied by the job worker. Ultimately, on the clearance of washing machine, duty is paid including all these values.
16. We now come to the core issue as to whether the removal of moulds and dies under Rule 57S(8) of the Rules without reversal of credit would be a violation as alleged by the Department.
17. Rule 57 A falls under the heading AA. Credit of duty paid on excisable goods used as inputs. Rule 57S, falls under the heading AAAA. Credit of Duty paid on capital goods used by the manufacturer of specified goods, reads as follows:
"57.S Manner of utilisation of the capital goods and the credit allowed in respect of duty paid thereon.
(1) The capital goods in respect of which credit of specified duty has been allowed under rule 57Q may be -
(i) used in the factory of the manufacturer of the final products; or
(ii) removed, after intimating the Assistant Commissioner of Central Excise, having jurisdiction over the factory and after obtaining dated acknowledgement of the same, from the factory for home consumption or for export, on payment of appropriate duty of excise leviable thereon or for export under bond, as if such capital goods have been manufactured in the said factory."
This provision is applicable only for the removal of duty paid capital goods.
18. Clause 8 of Rule 57S provides, "Notwithstanding anything contained in sub-rule (1), a manufacturer may, with the permission of the Commissioner and subject to such terms and conditions and limitations as he may impose, remove the moulds and dies, without payment of duty, to a job-worker for the purpose of production of goods on his behalf and according to his specifications."
19. We find that the above-said provision makes it clear that the removal of moulds and dies without payment of duty is in relation to only moulds and dies and not with respect of any other capital goods. It does not impose any condition that the raw materials also should be supplied by the assessee along with the moulds and dies. So long as the permission is granted by the Commissioner for removal of moulds and dies without payment of duty to the job worker, the question of deeming it as an improper clearance does not arise.
20. The Tribunal, in paragraph No.4 of its order, has relied upon the earlier decision in the case of Monica Electronics vs Cce reported in 2000 (123) ELT 1047, which was subsequently followed in the case of Anusika Autolite Ltd., V. CCE, Jaipur reported in 2002 (53) RLT 186 (CEGAT - Del.). In the case of Monica Electronics vs Cce reported in 2000 (123) ELT 1047, while interpreting clause (8) of Rule 57S, the Tribunal laid emphasis on the non-obstante clause and held that the expression 'job worker' in relation to Exemption Notification No.214 of 1986 similar to that of Notification No.119 of 1975 as in the case of Prestige Engineering (India) Ltd. vs Collector Of Central Excise, Meerut reported in 1994 (73) ELT 365 has no basis for denying the benefit of 'job worker' in terms of Rule 57S(8). It was clearly held that the definition of 'job worker' is in relation to a particular notification and not in relation to the provisions of the Modvat Rules, more particularly, Rule 57S(8). For better clarity, the relevant portion of the order reads as follows:
"4. We have considered the submissions and perused the records. On a perusal of the scheme of Rule 57S and the Sub-rules (8), (9) and (10) in particular, it appears that the said three Sub-rules deal with removal of moulds and dyes by a manufacturer to a job worker for the purpose of production of goods on his behalf and according to the specifications given by the manufacturer. Sub-rule (8) opens with a non obstante provision in relation to Sub-rule (1) thereof. Rule 57S itself deals with the manner of utilisation of capital goods and the credit allowed in respect of duty paid thereon. Sub-rule (9) puts a time limit of three months for bringing back the said moulds and dyes and the goods manufactured using the said moulds/dyes unless the period is extended by the Commissioner. Sub-rule (10) provides that if the moulds/dyes removed under Sub-rule (8) are not received back within the time allowed, duty shall be paid equivalent to the credit taken on the said moulds/dyes. On a close reading of the said three Sub-rules, it does not appear that the rule making authority had any intention to give the expression 'job worker' used in Sub-rule (8), the meaning given to it in the exemption Notifications like Notification No. 214/86. In the said notifications the 'job worker' is supplied with raw material by the manufacturer and the job worker clears the manufactured goods from his factory after utilising the raw materials supplied by the manufacturer. The intention is to exempt the 'job worker' of duty liability as a manufacturer. In the facts of the present case, the moulds which are capital goods, they are not materials which get consumed in the process of manufacture by the job worker. The scheme of Rule 57S and Sub-rules (8) to (10) thereof does not therefore appear to be compatible with the definition of 'job worker' in the said Notifications. We therefore, find that there is force in the contention of the ld. counsel that any interpretation of 'job worker' in Sub-rules (8) to (10) of Rule 57S as having the same meaning it has in the Exemption Notifications will distort the said provisions and make it unworkable. We also find that the decisions relied on by the Commissioner do not deal with the question of applicability of definition of 'job worker' in other Notifications to provisions of Rule 57S(8)."
21. We find the distinction made by the Tribunal, on facts, as against the decision in the case of Prestige Engineering (India) Ltd. vs Collector Of Central Excise, Meerut reported in 1994 (73) ELT 365, is justified as we find that the decision in the case of Prestige Engineering (India) Ltd. vs Collector Of Central Excise, Meerut reported in 1994 (73) ELT 365 as had been already extracted supra, the emphasis laid by the Supreme Court is that the Explanation appended to notification on the expression 'job worker' is in relation to the said notification and not otherwise. It, therefore, means, that the term 'job worker' in respect of one notification and the term 'job worker' in relation to Rule 57S(8) should be understood in the context of the provisions of the Modvat Rules. The provisions of Rule 57S(8) clearly mandates that consequent on the permission of the competent authority, moulds and dies should be removed, without payment of duty, to 'job worker'. If such condition has been complied with by the assessee, the Department cannot import any other meaning to disentitle the assessee of the benefit that flow out of Rule 57S(8) of the Rules.
22. We find that the decision in the case of Prestige Engineering (India) Ltd. vs Collector Of Central Excise, Meerut reported in 1994 (73) ELT 365 is not applicable to the facts of the present case and the same is distinguishable on facts. The Tribunal is justified in accepting this plea of the assessee. Further, the decision of the Tribunal in the case of Monica Electronics vs Cce reported in 2000 (123) ELT 1047, followed by the Tribunal in the present case, has been accepted by the Department and therefore, the principal laid down in the decision of the Supreme Court reported in 2006 (202) ELT 389 (SC) (Boving Fouress Ltd. V. Commissioner of Central Excise, Chennai) that the Revenue cannot agitate on the same question, which has already been accepted by them. The Supreme Court, in paragraph No.11, held as follows:
"This Court in a catena of decisions has held that where the department accepts the principle laid down by the Tribunal in one case and let it become final, then the department is not entitled to raise the same point in other cases. The department cannot pick and choose. (see: The decisions of this Court in Union of India & Others v. Kaumudini Narayan Dalal & Another - (2001) 10 SCC 231; Collector of Central Excise, Pune v. Tata Engineering & Locomotives Co. Ltd.- 2003 (158) ELT 130 (SC); Birla Corporation Ltd. v. Commissioner of Central Excise - 2005 (186) ELT 266 (SC); and Jayaswals Neco Ltd. v. Commissioner of Central Excise, Nagpur - 2006 (195) ELT 142 (SC). It has been held in all these cases that if no appeal is filed against an earlier order or the earlier appeal involving the identical issue was not pressed by the Revenue, the Revenue is not entitled to press the other appeals involving the same question. In Birla Corporation Ltd. (supra), this Court observed as follows:
"In the instant case the same question arises for consideration and the facts are almost identical. We cannot permit the Revenue to take a different stand in this case. The earlier appeal involving identical issue was not pressed and was, therefore, dismissed. The respondent having taken a conscious decision to accept the principles laid down in Pepsico India Holdings Ltd. [2001 (130) E.L.T. 193] cannot be permitted to take the opposite stand in this case. If we were to permit them to do so, the law will be in a state of confusion and will place the authorities as well as the assessees in a quandary."
23. In the present case, we find that when the Department having accepted the decision in the case of Monica Electronics vs Cce reported in 2000 (123) ELT 1047 without demur, in the present case, on the same set facts, they are not entitled to agitate the same issue with regard to the assessee's claim of removal of moulds and dies without payment of duty following the procedure prescribed under Rule 57S(8) of the Rules.
24. As far as the issue on double Modvat benefit is concerned, the Revenue has not raised the issue before the first Appellate Authority or before the Tribunal. Therefore, there is no justification for the Revenue to raise the plea afresh at the first instance before this Court.
25. For the foregoing reasons, we pass the following order:
i) On the questions of law raised, we are of the view that the Tribunal is justified in granting the benefit to the assessee. Accordingly, we answer the substantial questions of law in favour of the assessee and against the Revenue;
ii) consequently, the order of the Tribunal stands confirmed;
In the result, all the above Civil Miscellaneous Appeals are dismissed. No costs. Consequently, connected miscellaneous petitions are also dismissed.
Index :Yes/No (R.S.,J) (G.M.A.,J) Internet: Yes/No 28.08.2014 sl To 1. The Customs, Excise and Service Tax Appellate Tribunal, New Delhi.
2. The Commissioner of Customs and Central Excise (Appeals), Tiruchirappalli.
3. The Assistant Commissioner of Central Excise, Pondicherry.
R.SUDHAKAR,J.
AND G.M.AKBAR ALI,J.
sl C.M.A.Nos.2682, 2877, 2396 and 3544 of 2005 & connected miscellaneous petitions 28.08.2014