Custom, Excise & Service Tax Tribunal
Shridhar Metal vs Commissioner Of Central Excise on 4 September, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI COURT No. II APPEAL No.E/88586 & 88589/14 (Arising out of Order-in-Original No.23-26/CEX/COMMR/2014 dated 06/05/2014 passed by Commissioner of Central Excise, Customs & Service Tax, Aurangabad) For approval and signature: Honble Mr. Anil Choudhary, Member (Judicial) Honble Mr. Raju, Member (Technical) 1. Whether Press Reporters may be allowed to see :No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the :Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether Their Lordships wish to see the fair copy :Seen of the Order? 4. Whether Order is to be circulated to the Departmental :Yes authorities? ========================================
Shridhar Metal Appellant
Vs.
Commissioner of Central Excise Respondent
& Service Tax, Aurangabad
Appearance:
Shri.A.B.Nawal, Advocate for appellant
Shri.V.K.Agarwal, Addl. Comm. (AR) for respondent
CORAM:
Honble Mr.Anil Choudhary, Member (Judicial)
Honble Mr. Raju, Member (Technical)
Date of Hearing : 04/09/2015
Date of Decision : 04/09/2015
ORDER NO
Per: Raju
1. The appellants are working within the premises of Aurangabad Electricals Limited (AEL). AEL is using various aluminium products for manufacture of its final products. During the Manufacturing process some quantity of aluminium dross, aluminium turning and aluminium oily flash is generated. AEL has engaged the appellants to convert these waste materials into aluminium ingots. The said aluminium ingots are returned by the appellants to AEL. All these activities happen within the premises of AEL.
2. Demand notices were issued to the appellants demanding Central Excise duty on the ingots manufactured by them on the grounds that the appellants are manufacturers in their own right and should have obtained separate registration. It was alleged that it is immaterial that the appellant or operating within the premises of AEL.
3. The learned Counsel for the appellant pointed out that a demand notice was issued to AEL, as well, demanding duty on the aluminium dross, aluminium turning and aluminium oily flash cleared by AEL to the appellant. The said demand notice was also adjudicated and confirmed by the Commissioner. In the appeal file by AEL against the said order of the Commissioner the Tribunal has already decided the issue vide order A/1534-1535/15/EB dated 23/4/2015. In the said decision, the Tribunal has observed as under:
As regard issue whether the remnant material cleared by the appellant to M/s. Shridhar Metal Works is clearance for the home consumption and leviable to excise duty or it is captive consumption and exempted under Notification No. 67/95 CE dated 16/3/1995, we observed that a part of the premises of the appellant was given on leave and licence agreement to different entity i.e. M/s. Shridhar Metal Works who is unrelated to the appellant therefore in our view the premises which is used by M/s. Shridhar Metal Works is out side premises of the appellant. Secondly M/s. Shridhar Metal Works is an independent entity who carried out job work on the material supplied by the appellant in such situation M/s. Shridhar Metal Works has independent manufacturer of aluminium ingots therefore removal of remnant material to M/s. Shridhar Metal Works cannot be treated as captive consumption and therefore the same shall not be entitled for exemption under Notification No. 67/95. In various judgment by various forums, view has been taken that if any other person carry out the manufacture, even in the premises of another manufacturer for the purpose of job work basis it cannot be said that job worker is hired labourer therefore job work shall be treated as independent manufacture and not the premises owner some of the judgment are cited below:-
Hindustan Zinc Ltd. Vs., CCE, Jaipur-II [2015(315) E.L.T. 86(Tri-Del.)
6.?The appellant had got the zinc and lead electrodes fabricated through job workers in their own premises out of the raw materials and design supplied by them. Though the job worker had brought their own machinery and appliances and their own workers, the job had been done in the appellants premises and under the appellants supervision. It is seen that in terms of the appellants contract with their job workers, the job workers were to pay the minimum wages to the skilled and unskilled labourers as per the Governments orders and were to comply with the Governments regulations in this regard. In case of injury to any worker in any accident, it is the job workers, who would be liable to pay compensation to the worker and if any compensation is paid by the appellant, the same would be recoverable from the job workers. In terms of the conditions of the contract, the job workers were to ensure the safety of the labour employed by them as provided under the Factories Act. The Commissioner on the basis of the above clauses of the Contract and also the provision in the contract, requiring the job workers to work round the clock, has inferred that the job workers are merely hired labourers of the appellant. In our view, this conclusion of the Commissioner is totally wrong, as from the above clauses of the contract, it cannot be inferred that the job workers were merely hired labourers of the appellant. Moreover, it is not disputed by the department, that in respcct of the identical contracts of the appellants Visakhapattanam unit with its job workers for identical work, the Chennai Bench of the Tribunal vide judgement reported in 2005 (188) E.L.T. 331 has held that the job workers role was much more than mere receiving wages for labour involved in manufacture of Lead and Aluminium Electrodes and, therefore, the job workers cannot be said to be mere hired labourers. Applying the ratio of the Chennai Bench judgement to the facts of this case, we hold that it is the job workers who have to be treated as the manufacturers and, therefore, the duty on Aluminium and lead electrodes got manufactured by them on job work basis cannot be demanded from the appellant by treating them as manufacturers. The impugned orders are set aside. The appeals are allowed.
In view of the above judgment of coordinate bench of this Tribunal it is settled that if job worker is doing job work within the factory premises of the principal with his own capital goods, it is job work and shall be treated as manufacture. In the present case, job worker M/s. Shridhar Metal Works carried out manufacturing process of aluminium ingots in the premises, which was taken on leave and licence basis on consideration of rent, therefore M/s. Shridhar Metal Works is manufacturer on job work basis therefore removal of remnant material by the appellant to M/s. Shridhar Metal Works cannot be considered captive consumption. As regard the issue that even if the removal of remnant material by the appellant to M/s. Shridhar Metal Works is not treated as captive consumption and it is home consumption, whether appellant is required to pay duty on such removal. We are of the view that the removal of remnant material to M/s. Shridhar Metal Works is not sale/purchase transactions but it is on job work basis. This fact is not under dispute that owner ship of remnant material remains with appellant and M/s. Shridhar Metal Works has carried out process of making aluminium ingots is on behalf of the appellant and M/s. Shridhar Metal Works paying only processing charges/labour charges, therefore in this fact, transactions is of job work. It is also fact that remnant material after conversion into aluminium ingots, the ingots is used in the manufacture of motor vehicle parts by the appellant which are admittedly cleared on payment of duty. Remnant is generated during the manufacture of motor vehicle part out of the cenvatable inputs therefore remnant which is squarely meant for use for further production of dutiable goods is in the nature input/partial processed inputs. Therefore removal of such remnant material can be statutorily made in terms of Rule 4(5)(a) of Cenvat Credit Rules, 2004 which is reproduced below:
4. Conditions for allowing CENVAT credit. (5) (a) The CENVAT credit shall be allowed even if any inputs or capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair, re-conditioning, or for the manufacture of intermediate goods necessary for the manufacture of final products or any other purpose, and it is established from the records, challans or memos or any other document produced by the manufacturer or provider of output service taking the CENVAT credit that the goods are received back in the factory within one hundred and eighty days of their being sent to a job worker and if the inputs or the capital goods are not received back within one hundred eighty days, the manufacturer or provider of output service shall pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods by debiting the CENVAT credit or otherwise, but the manufacturer or provider of output service can take the CENVAT credit again when the inputs or capital goods are received back in his factory or in the premises of the provider of output service From the above provision, assessee is permitted to remove the inputs for job work. We further note that similar provision is also made under Rule 16(a) of Central Excise Rules, 2002 which is reproduced below:
Removal of goods for job work, etc.?RULE [16A. Any inputs received in a factory may be removed as such or after being partially processed to a job worker for further processing, testing, repair, re-conditioning or any other purpose subject to the fulfillment of conditions specified in this behalf by the Commissioner of Central Excise having jurisdiction.] From the above rule also it is permitted that input can be removed for job work. Even in the job work if the resultant product is returned and used in the manufacture of dutiable goods the said job work is not liable for duty, in terms of notification 214/86-CE dated 25/3/1986. It is observed that in view of Rule 4(5)(a) and Rule 16 (a) of Central Excise Rules, 2002 and Notification No. 214/86 -CE it indicates that intention of the legislator is that if the input whether as such, or partially processed or after processing by the job worker finally used in the final product which is cleared on payment of duty, all these stags of the movement of goods from the raw-material stage up to the final product no duty is leviable. In the present case remnant are at intermediate stage that means initial input on which Cenvat credit is availed has under gone the process of manufacturing and during such process the remnant arose. The said remnant were sent for job work and it converted into aluminium ingots and said resulted ingots were used in the motor vehicle parts which are cleared on payment of duty. In this chain the remnant is an intermediate input therefore movement of such input undoubtedly covered under Rule, 4(5)(a) of Cenvat Credit Rules, 2004 and Rule 16(a) of Cenvat Credit Rules, 2002. Therefore no duty can be demanded on the removal of such remnant material for job work. Thereafter the Tribunal relying on the following Decisions:
1 WYETH LABORATORIES LTD.Vs.CCE, Bombay - 2000 (120) E.L.T. 218 (Tribunal - LB) 2 SHAKTI WIRE PRODUCTS Vs. CCE, Mumbai - 2009 (241) E.L.T. 223 (Tri. Mumbai) 3 JAIN METAL COMPONENTS PVT. LTD. Vs. CCE, JAIPUR-II - 2006 (206) E.L.T. 842 (Tri. - Del.) 4 COMET BRASS INDUSTRIES Vs.CCE, DAMAN - 2005 (189) E.L.T. 62 (Tri. - Mumbai) held as follows From the above judgments, it is well settled that the waste generated during the course of manufacture of final product, can be sent without payment of duty for melting to the job worker and thereafter the same is used for manufacture of dutiable goods. In view of our discussion which is based upon various judgments discussed above we are of the considered view that the removal of remnant by appellant to the job worker is not liable to duty and the adjudicating authority has wrongly confirmed the duty demand and imposed penalties. Since, we have taken view that the removal of remnant is not dutiable, we are not going into aspect of excisability of said remnant material with reference to judgments in case of Indian Aluminium Co. Ltd and Hindalco Industries Limited(supra). In view of above discussion and judgments we are of the considered view that demand of duty on clearance of remnant is not sustainable. Appeals are allowed with consequential relief, if any, in accordance with law.
5. The appellant also asserted that since the issue has been decided by a coordinate bench, the said decision has to be followed in view of the decision of the Honble High Court of Mumbai in case of Seagall threads.
6. Learned AR argued that the appellants are independent Manufacturers and therefore the goods Manufactured by them have to suffer Central Excise duty. For this assertion he also relied on the decision of Tribunal in case of AEL (supra).
7. We have considered the arguments of both sides and the records. It is seen that in the very same facts of the impugned case the tribunal has already held that the same activities are entitled to be treated as that of a job worker. The said decision of tribunal drops the demand of duty on the waste cleared by the AEL to the appellants treating it as job work. Since the ratio of the case is squarely applicable to the present case the appellants have to be treated as independent manufacturers doing jobwork for AEL. Since the clearance of aluminium waste is treated as clearance for jobwork the same treatment is to be given to the material manufactured and returned by appellants. As a result the demands can not be sustained. The appeals are therefore allowed.
(Pronounced in Court) (Anil Choudhary) Member (Judicial) (Raju) Member (Technical) pj 1 9 Appeal No.E/88586/14