Custom, Excise & Service Tax Tribunal
Nile Limited vs The Commissioner Of Central Tax ... on 19 March, 2025
(1)
E/30062, 30064, 30065 & 30068/2020
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Division Bench - Court No. - I
Excise Appeal No. 30062 of 2020
(Arising out of Order-in-Original No. TTD-EXCUS-000-COM-03 to 06-19-20 dt.31.07.2019
passed by Commissioner of Central Tax, Tirupati-GST)
M/s Nile Limited
Plot No. 38 & 40, IDA Gajulamandyam, ......Appellant
Renigunta, Chittoor, AP - 517 520
VERSUS
Commissioner of Central Tax
Tirupati - GST
9/86-A, Amaravati Nagar, West Church
......Respondent
Compound, Tirupati, AP - 517 502 with Excise Appeal No. 30064 of 2020 (Arising out of Order-in-Original No. TTD-EXCUS-000-COM-04-19-20 dt.31.07.2019 passed by Commissioner of Central Tax, Tirupati-GST) M/s Nile Limited Plot No. 38 & 40, IDA Gajulamandyam, ......Appellant Renigunta, Chittoor, AP - 517 520 VERSUS Commissioner of Central Tax Tirupati - GST 9/86-A, Amaravati Nagar, West Church ......Respondent Compound, Tirupati, AP - 517 502 with Excise Appeal No. 30065 of 2020 (Arising out of Order-in-Original No. TTD-EXCUS-000-COM-06-19-20 dt.31.07.2019 passed by Commissioner of Central Tax, Tirupati-GST) M/s Nile Limited Plot No. 38 & 40, IDA Gajulamandyam, ......Appellant Renigunta, Chittoor, AP - 517 520 VERSUS Commissioner of Central Tax Tirupati - GST 9/86-A, Amaravati Nagar, West Church ......Respondent Compound, Tirupati, AP - 517 502 (2) E/30062, 30064, 30065 & 30068/2020 and Excise Appeal No. 30068 of 2020 (Arising out of Order-in-Original No. TTD-EXCUS-000-COM-05-19-20 dt.31.07.2019 passed by Commissioner of Central Tax, Tirupati-GST) M/s Nile Limited Plot No. 38 & 40, IDA Gajulamandyam, ......Appellant Renigunta, Chittoor, AP - 517 520 VERSUS Commissioner of Central Tax Tirupati - GST 9/86-A, Amaravati Nagar, West Church ......Respondent Compound, Tirupati, AP - 517 502 Appearance Shri B. Venugopal, Advocate for the Appellant.
Shri M. Anukathir Surya, AR for the Respondent.
Coram: HON'BLE MR. A.K. JYOTISHI, MEMBER (TECHNICAL) HON'BLE MR. ANGAD PRASAD, MEMBER (JUDICIAL) FINAL ORDER No. A/30079-30082/2025 Date of Hearing: 21.01.2025 Date of Decision: 19.03.2025 [Order per: A.K. JYOTISHI] M/s Nile Limited (hereinafter referred to as the appellant) are in appeal against the common Order-in-Original dated 31.07.2019 (Impugned Order), passed by the Commissioner of Central Tax, Tirupati-GST (Adjudicating Authority) with request that the impugned order be set aside.
2. The issue, in brief, is that the appellants are the manufacturers of lead ingots and they also undertake job work of conversion of lead scrap into lead alloy for M/s Amara Raja Batteries Ltd. The department noticed that the principal manufacturer, who was supplying three inputs, viz., (a) Defective batteries, (b) Expired batteries and (c) Used batteries to the appellant, who, in addition to the inputs supplied, also used some of his own materials viz., elements like Antimony, Tin, Selenium, etc., for converting them into lead/ lead alloys and clear the same to the principal manufacturer without payment of duty, in terms of Notification No. 214/86-CE dt.25.03.2006. Various SCNs were issued on this issue to the appellants as per the details below:-
(3)E/30062, 30064, 30065 & 30068/2020 Duty Penalty Period SCN No. SCN Date confirmed confirmed involved (Rs.) (Rs.) Nov 2009 to 127/TCCE/2014 03.09.2014 8,52,37,263 8,52,37,263 Feb 2014 March 2014 14/TCCE/2015 09.03.2015 2,05,12,114 20,51,211 to Dec 2014 Jan 2015 to 98/TCCE/2015 06.01.2016 1,74,96,181 17,49,618 Oct 2015 Nov 2015 to 21/TCCE/2017 21.11.2017 4,32,18,708 43,21,870 June 2017 TOTAL 16,64,64,266 9,33,59,962
3. All these SCNs were disposed of by way of common order i.e., impugned order dt.31.07.2019. The Adjudicating Authority, essentially, examined the eligibility of the appellant to avail the benefit of notification 214/86-CE. It is an admitted fact that the principal manufacturer has given necessary undertaking to the jurisdictional Central Excise officer as regards payment of duty on the final products which included the said job work products, which are being sent without payment of duty by the appellant. The Adjudicating Authority has gone through the provisions of the notification and especially explanation-1, where the expression "job work"
has been defined to come to the conclusion that in a case where inputs, other than the inputs provided by the principal manufacturers, are used in the job work, the said activities would not be considered as job work under the said notification. The Adjudicating Authority has essentially held that certain inputs were used by the appellant like Antimony, Tin, Selenium, etc., while undertaking job work on the scrap batteries supplied by M/s Amara Raja Batteries Ltd and therefore, the activity cannot be considered as job work. He relied on the case law of M/s Prestige Engineering (India) Ltd Vs CCE, Meerut [1994 (73) ELT 497 (SC)], wherein the Hon'ble Supreme Court, inter alia, held that job work means goods produced out of materials supplied by customer and where the job workers contribute mainly their labour and skill though done with the help of their own tools, gadgets or machinery but when the job worker contributes his own raw material to the article supplied by the customers and manufactures different goods it does not amount to job work. However, addition or application of minor items by job worker would not detract its being a job work. In the facts of the case, the Adjudicating Authority felt that addition of inputs like Antimony, Tin, (4) E/30062, 30064, 30065 & 30068/2020 Selenium, etc., which are admittedly their inputs and not supplied by the principal manufacturer, is in no way minor as they are essential for making lead alloys of specific grade and for intended end use as desired by the principal manufacturer. Therefore, in view of the said judgment, it was held that the work undertaken shall not amount to job work and therefore, not covered within the purview of notification 214/86-CE. It was held that the notification benefit was available to the extent where the scrap batteries got converted into lead scrap, however, when the lead scrap was converted into pure lead and lead alloys by going for further processing with the use of other inputs supplied by the appellant, the same cannot be covered within the ambit of notification 214/86-CE. As regards the submission that the principal manufacturer has received all the job work goods and used the same in their finished goods so manufactured, which were cleared on payment of appropriate Central Excise duty in support of which they even submitted certificate dt.10.01.2019, the Adjudicating Authority observed that the principal manufacturer was supplying three types of batteries viz., defective batteries, expired batteries and used batteries to the appellant, who, by smelting process, broke these batteries and obtained lead scrap contained therein. Subsequently, by using inputs viz., Antimony, Tin, Selenium, etc., on their own account, converted the lead scrap into particular grade of pure lead and also lead alloys, which were cleared to the supplier. As regards the plea of revenue neutrality, the Adjudicating Authority felt that this plea is not tenable in view of the judgment in the case of National Conductors Vs CCE & ST, Daman [2014 (306) ELT 635 (Tri- Ahmd)].
4. As far as the issue of limitation is concerned, the Adjudicating Authority has examined the facts of the case and especially, in view of department having prior knowledge in terms of SCN dt.06.09.2013, denying the Cenvat Credit availed on the inputs used in the course of job work based on the same set of facts. The Adjudicating Authority also examined the cited case law of Nizam Sugar Factory Vs Collector [2006 (197) ELT 465 (SC)] and after examining the fact that SCN dt.03.09.2014 is not periodical or similar to the earlier SCN dt.06.09.2013, held that this cannot be ground for not invoking extended period. On the contrary, he observed that the principal manufacturer, vide their letter dt.01.04.2013 informed the Jurisdictional Assistant Commissioner that they would be sending to the (5) E/30062, 30064, 30065 & 30068/2020 appellant/job worker Antimony, Tin, Selenium etc., on job work basis for conversion into smelting blocks and process for alloy by melting of smelting blocks by mixing Antimony, Tin, Selenium, etc., which was also confirmed by the appellant vide their letter dt.07.06.2013. However, despite this, the appellant used these items on their own account during the process undertaken by them. Therefore, it is a case of misstatement of facts. Therefore, in the facts of the case, extended period is rightly invocable. It is also an admitted fact that while the first SCN has been issued invoking extended period and also proposing penalty under section 11AC, the subsequent periodical SCNs dt.09.03.2015, 06.01.2016 and 27.11.2017 were issued within normal period proposing to issue penalty under Rule 25 of Central Excise Rules, 2002 only.
5. Learned Advocate for the appellant is mainly contesting that there is no such compulsion that all the raw materials are to be supplied by the principal manufacturer to job worker in order to avail the benefit under notification 214/86-CE. He submits that they are using negligible quantity of alloying elements, which is less than 2%, which is normally used commercially as lead alloys and these alloying elements generally are used to give greater hardness and strength in storage battery grids and therefore, these alloying elements are more in the nature of consumables than raw materials. He further submits that essentially notification 214/86-CE is to exempt payment of duty from job worker to the principal manufacturer who gets goods manufactured from a job worker. Therefore, once the goods are sent to the premises of principal manufacturer, who clears the same for home consumption on payment of duty, which is not in dispute here, the duty liability would rest only on the principal manufacturer and not on the appellant. They have relied on the following judgments:-
a) Indian Perfumes and Flavours & Shri Achal Gupta Vs CCE, Noida [2017 (9) TMI 1060 - CESTAT Allahabad]
b) RP Foundry Pvt Ltd, Mandi Gobindgarh Vs CCE, Chandigarh [2016 (11) TMI 865 - CESTAT Chandigarh]
c) Uflex Ltd Vs CCE [2012 (12) TMI 883 - CESTAT New Delhi]
d) Desh Rolling Mills Vs CCE, Delhi [2000 (122) ELT 481 (Tribunal)]
e) CCE, Mumbai-V Vs Shakti Insulated Wires Ltd [2010 (254) ELT 333 (Tri-Mumbai)] (6) E/30062, 30064, 30065 & 30068/2020
6. They have also contested the confirmation of demand invoking extended period on the grounds that there was a SCN dt.06.09.2013 and therefore, there was prior knowledge to the department and once there is prior knowledge, no subsequent SCNs can be issued on the same subject invoking extended period relying on the judgment of Hon'ble Supreme Court in the case of Nizam Sugar Factory Vs Collector (supra) and on the order of Delhi Bench of this Tribunal in the case of Tata Consultancy Services Ltd Vs CST, Delhi [2018 (18) GSTL 478 (Tri-Del)].
7. On the other hand, learned AR is mostly submitting that it is not a case where notification 214/86-CE covers goods which were manufactured by job work activity or otherwise. In the facts of the case, there is clear manufacture of pure lead and lead alloys from scrap batteries in the premises of the appellant and therefore, what are being cleared by the appellant to the principal manufacturer are manufactured goods. All the manufactured goods are required to discharge applicable Central Excise duty, however, in terms of notification 214/86-CE, any job work goods, manufactured or otherwise, when cleared to the principal manufacturer are exempted from payment of duty subject to certain conditions. It is not in dispute that those conditions are not fulfilled by the principal manufacturer. However, what is being disputed is whether the entire activities performed by the appellant would get covered within the definition of job work or otherwise. If it is not covered within the definition of job work, then the notification itself would not be applicable and duty would be required to be discharged irrespective of whether it is being cleared back to the principal manufacturer or otherwise. They have relied on the judgment of Hon'ble Supreme Court in the case of M/s Prestige Engineering (India) Ltd Vs CCE, Meerut (supra), wherein the Hon'ble Supreme Court, inter alia, at Para 6 observed as follows:-
"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".(7)
E/30062, 30064, 30065 & 30068/2020
8. Therefore, what essentially follows is that if any addition is made by the job worker, which cannot be considered as minor addition and when they are of substantial nature and considerable value, then the work could not be covered within the scope of "job work". Learned AR also rebutted the claim that it is a revenue neutral situation relying on the case of The Board of Control for Cricket in India Vs CST, Mumbai-II [2019 (29) GSTL 304 (Tri- Mumbai)], wherein it was held that the revenue neutrality cannot be ground for not demanding the applicable duty. Relying on the judgment in the case of Jay Yushin [2000 (119) ELT 718 (Tri-LB)] which provided the criteria for determining revenue neutrality and its consequences, the plea of revenue neutrality was rejected. Similarly, he also placed reliance on the decision of coordinate bench of this Tribunal in the case of M/s National Conductors Vs CCE & ST, Daman (supra), wherein, inter alia, it was observed that question of revenue neutrality would arise only when the activities of clearance takes place within the sister concern or their own units.
9. As regards ground of limitation not being invocable, learned AR submits that apart from the fact that date of prior knowledge was not in relation to subject matter of the present appeal, as it was in relation to denial of Cenvat Credit and therefore, it cannot as such be a bar when new facts come to the notice of the department. He has relied on the judgment of Hon'ble Gujarat High Court in the case of CCE, Surat-I Vs Neminath Fabrics Pvt Ltd [2010 (256) ELT 369 (Guj)], as also the judgment of Hon'ble Supreme Court in the case of CCE, Visakhapatnam Vs Mehta & Co [2011 (2) TMI 2 - Supreme Court]. He has further contested that the reliance placed by the appellant is not relevant as the issue involved was conversion of lead and lead alloys from lower purity to higher purity without change of its characteristics of the items, whereas, in the instant case, there is conversion of used or defective batteries into lead and lead alloys using their inputs and therefore, distinguishable on facts.
10. Heard both sides and perused the records.
11. The short question which needs to be decided is whether in the facts of the case, Notification No.214/86-CE is admissible or not. We find that admittedly they have used certain alloying elements when converting scrap into pure lead and leady alloys. The appellants, through an elaborate (8) E/30062, 30064, 30065 & 30068/2020 process, converted the used and defective batteries into scrap and thereafter, further converted it into pure lead and thereafter, again further converted it into lead alloys by using/adding certain elements like Antimony, Tin, Selenium, etc. It is also not in dispute that these three inputs are used by the appellant themselves and are not being supplied by the principal manufacturer.
12. The wordings of the notification has to be construed strictly, as has been held by the Hon'ble Supreme Court in the case of CC (Import) vs Dilip Kumar & Co. [2018 (361) ELT 577 (SC)]. On a plain reading of the explanation, which defines what constitutes 'job work', it would be obvious that all the inputs or semi finished goods are to be sent by the principal manufacturer and the activities are to be undertaken by the job worker, which may or may not amount to manufacture. Even considering the observations of Hon'ble Supreme Court in the case of M/s Prestige Engineering (India) Ltd Vs CCE, Meerut (supra), a minor addition or any incidental or ancillary addition would not take away these activities from the purview of job work. However, the fact that lead alloys, categorically, contain these alloying elements without which the lead alloys cannot be made and therefore, it cannot be a mere minor or incidental addition. Lead alloys are distinct product having distinct end use and the alloying materials are absolutely essential for making lead alloys, therefore, relying on the judgment of M/s Prestige Engineering (India) Ltd Vs CCE, Meerut (supra), the activities performed by the appellant in respect of old and used batteries received from principal manufacturer cannot be considered as job work. Once, it is not considered as job work, there has to be payment of duty as there is no other notification available for exempting the same and the plea that ultimately the principal manufacturer would have paid the duty on the same would be of no consequence when the duty is required to be discharged at the stage where the said manufactured goods are cleared from the factory where they are manufactured.
13. Similarly, as regards invocation of extended period, we find that no substantive ground has been adduced by the appellant in support that there was a bonafide mistake or wrong understanding of the law. On the contrary, their reliance on previous SCN is also not relevant because, as held by the Adjudicating Authority, that was in relation to denial of Cenvat Credit.
(9)E/30062, 30064, 30065 & 30068/2020 Moreover, the case law cited by learned AR in the case of CCE, Surat-I Vs Neminath Fabrics Pvt Ltd (supra) is also relevant. In this case, there is enough ground for the department to invoke extended period as there has been a deliberate suppression and misstatement of fact. Therefore, the extended period has been rightly invoked. Similarly, the penalty imposed under section 11AC is also sustainable in respect of Appeal No.E/30062/2020, as also in respect of other appeals under Rule 25 of Central Excise Rules, 2002.
14. Therefore, we do not find any infirmity in the common impugned order passed by the Adjudicating Authority confirming the demands in respect of all the four SCNs and also imposing penalty under section 11AC in respect of Appeal No.E/30062/2020 and under Rule 25 of CER, 2002 in respect of other three appeals i.e., E/30064, 30065 & 30068/2020.
15. Accordingly, appeals are dismissed.
(Pronounced in the Open Court on 19.03.2025) (A.K. JYOTISHI) MEMBER (TECHNICAL) (ANGAD PRASAD) MEMBER (JUDICIAL) Veda