Custom, Excise & Service Tax Tribunal
Rajkot vs Rajhans Metals Pvt Ltd on 28 June, 2018
In The Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench At Ahmedabad
Date of
Impugned Order
Case No Impugned Passed By Appellant Respondent
Detail's
Order
Commissioner of
OIO- Central Excise, C.C.E. & D M Brass
E/10137/2014-DB 04/10/2013
120/COMMR/2013 Customs and S.T.-Rajkot Extrusion
Service Tax-RAJKOT
Commissioner of
Central Excise,
OIO- C.C.E. & Rajhans
E/10194/2014-DB 04/10/2013 CUSTOMS
121/COMMR/2013 S.T.-Rajkot Metals Pvt Ltd
(Adjudication)-
RAJKOT
Commissioner of
Central Excise,
E/10198/2014-DB OIO-104- C.C.E. &
16/09/2013 CUSTOMS D N Engineers
E/CO/12292/2014 105/COMMR/2013 S.T.-Rajkot
(Adjudication)-
RAJKOT
Commissioner of Amul
E/10341/2014-DB OIO-106-109- C.C.E. &
16/09/2013 Central Excise and Industries Pvt
E/CO/11836/2014 COMMR-2013 S.T.-Rajkot
Service Tax-RAJKOT Ltd
Commissioner of Amul
OIA-106- C.C.E. &
E/10342/2014-DB 16/09/2013 Central Excise and Industries Pvt
109/COMMR/2013 S.T.-Rajkot
Service Tax-RAJKOT Ltd
Commissioner of Amul
E/10343/2014-DB OIA-106- C.C.E. &
16/09/2013 Central Excise and Industries Pvt
E/EH/10878/2017 109/COMMR/2013 S.T.-Rajkot
Service Tax-RAJKOT Ltd
Commissioner of Amul
OIA-106- C.C.E. &
E/10344/2014-DB 16/09/2013 Central Excise and Industries Pvt
109/COMMR/2013 S.T.-Rajkot
Service Tax-RAJKOT Ltd
Commissioner of Amul
OIA-106- C.C.E. &
E/10345/2014-DB 16/09/2013 Central Excise and Industries Pvt
109/COMMR/2013 S.T.-Rajkot
Service Tax-RAJKOT Ltd
Commissioner of
OIO-118-119- C.C.E. & Shree Bhavani
E/10346/2014-DB 04/10/2013 Central Excise and
COMMR-2013 S.T.-Rajkot Extrusion
Service Tax-RAJKOT
Commissioner of
OIA-118- C.C.E. & Bhavani
E/10347/2014-DB 04/10/2013 Central Excise and
119/COMMR/2013 S.T.-Rajkot Extrusion
Service Tax-RAJKOT
Commissioner of
OIO-99-101- C.C.E. & Finecast
E/10348/2014-DB 16/09/2013 Central Excise and
COMMR-2013 S.T.-Rajkot Industries
Service Tax-RAJKOT
Commissioner of
E/10349/2014-DB OIA-99- C.C.E. & Finecast
16/09/2013 Central Excise and
E/CO/12294/2014 101/COMMR/2013 S.T.-Rajkot Industries
Service Tax-RAJKOT
E/10350/2014-DB
Commissioner of
E/EH/10877/2018 OIA-99- C.C.E. & Finecast
16/09/2013 Central Excise and
E/CO/12293/2014 101/COMMR/2013 S.T.-Rajkot Industries
Service Tax-RAJKOT
E/CO/12295/2014
Commissioner of
Amul
OIO- Central Excise, C.C.E. &
E/14115/2013-DB 16/09/2013 Industries Pvt
103/COMMR/2013 Customs and S.T.-Rajkot
Ltd
Service Tax-RAJKOT
Represented by:
For Appellant: Shri S.J. Vyas, Sh. P. Sheth & Sh. A. Nainawati
(Advocates)
For Respondent: Shri Sameer Chitakara (A.R.)
CORAM:
HON'BLE MR. RAMESH NAIR, MEMBER (JUDICIAL)
HON'BLE MR. RAJU, MEMBER (TECHNICAL)
2|Page E/10137,10194,10198,10341-10350/2014,E/14115/2013-DB
Date of Hearing:19.06.2018
Date of Decision:28.06.2018
Final Order No. A/ 11274-11287 /2018
Per: Ramesh Nair
In all these appeals, the common issue involved is that whether
the respondents are required to pay an amount under Rule 6(3) of
Cenvat Credit Rules, 2004 in the fact that the respondents are working
as job worker under Notification No. 214/86-CE dated 25.03.1986. The
case of the department is that since the respondents are manufacturing
the goods for the principle manufacturer on job work basis and availing
the exemption Notification No. 214/1986-CE, the goods are exempted,
accordingly they are required to pay an amount under Rule 6(3) of
Cenvat Credit Rules, 2004.
2. Sh. Sameer Chitkara, Ld. Additional Commissioner (AR)
appearing on behalf of the Revenue reiterating the grounds of appeal
submits that the goods manufactured by the appellants even though
on job work basis, is exempted from whole of the duty in terms of
Notification No. 214/1986-CE dated 25.03.1986, therefore, in terms of
Rule 6(3), the appellant are required to pay an amount as per the rate
prescribed under the said Rules.
3. Sh. P. Sheth, Sh. S. J. Vyas & Sh. A. Nainawati, Ld. Counsels
appearing on behalf of the Respondents submitted that the notification
214/1986-CE is not an exemption which exempt the product from
payment of duty the goods right from input stage upto the final product
cleared from his factory remained dutiable, therefore, it cannot be said
that the goods are exempted, therefore, Rule 6(3) does not apply in
the facts of the present case. They submit that as per 3 rd Proviso to
3|Page E/10137,10194,10198,10341-10350/2014,E/14115/2013-DB
Rule 3(1), there is specific provision that even for the goods
manufactured under Notification 214/86-CE, the Cenvat Credit is
admissible. He also placed reliance on the following judgments.
Sterlite Industries (I) Ltd. vs CCE 2005 (183) ELT 353 (Tri.-LB)
MPI Paper Pvt. Ltd. vs CCE 2016 (336) ELT 86(T)
Western India Forging P. Ltd. vs CCE 2014 (36) STR 637 (T)
Monarch Catalyst P. Ltd. vs CCE 2013 (291) ELT 478 (T)
CCE vs Ballarpur Industries Ltd. 2007 (215) ELT 489 (SC)
CC vs Toyo Engineering India Ltd. 2006 (201) ELT 513 (SC)
Escorts Ltd. vs CCE 2004 (171) ELT 145 (SC)
4. We have carefully considered the submissions made by both the
sides and perused the records. We find that the Revenue sought to
recover the amount as prescribed under Rule 6(3) of Cenvat Credit
Rules, 2004 on the ground that the goods manufactured by the
respondents is exempted under Notification 214/86-CE, therefore, Rule
6(3) applies. In this regard, we have perused the 3rd Proviso to Rule
3(1) of Cenvat Credit Rules, 2004 which reads as under:
Rule 3, Cenvat Credit -...........................................................
..........................................................................................
.......................................................................................... ..............................
[Provided that the CENVAT credit shall be allowed to be taken of the amount equal to central excise duty paid on the capital goods at the time of debonding of the unit in terms of the para 8 of notification No. 22/2003-Central Excise, published in the Gazette of India, part- II, Section (i), vide number G.S.R.265(E), dated, the 31 st March, 2003] paid on -
(i) any input or capital goods received in the factory of manufacture of final product or premises of the provider of output service on or after the 10th day of September, 2004; and
(ii) any input service received by the manufacturer of final product or by the provider of output services on or after the 10th day of September, 2004, including the said duties, or tax, or cess paid on any input or input service, as the case may be, used in the
4|Page E/10137,10194,10198,10341-10350/2014,E/14115/2013-DB manufacture of intermediate products, by a job-worker availing the benefit of exemption specified in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 214/86- Central Excise, dated the 25th March, 1986, published in the Gazette of India vide number G.S.R. 547 (E), dated the 25th March, 1986, and received by the manufacturer for use in, or in relation to, the manufacture of final product, on or after the 10th day of September, 2004.
5. In view of the above explicit provision under the Cenvat Credit Rules even though the goods manufactured under Notification 214/86- CE, the Cenvat Credit in respect of inputs used in the said goods is admissible. Therefore, Rule 6(3) shall not apply in the present case.
This issue has been specifically considered by the Larger Bench of this Tribunal in the case of Sterlite Industries (India) Ltd. (Supra), wherein the Larger Bench has passed the following order:
"2. The revenue is denying the Modvat credit to the present job worker on the grounds that the inputs were used in the manufacture of the goods which were cleared without payment of duty. Pausing here for a second, let us take a situation where the basic inputs is sent by the principal manufacturer after debiting the Modvat credit taken by him. The job worker takes the credit of the same his factory, utilises other inputs procured directly by him after taking the Modvat credit on the same and clear the processed goods to the principal manufacturer on payment of duty and the principal manufacturer takes the credit of the same in his factory and utilises such credit for payment of duty on his final products at the time of clearance. In such a situation, there can be no objection or dispute by the revenue as regards the admissibility of the credit on the inputs received directly by the job worker and utilised in his factory. The only effect of the above procedure adopted by the principal manufacturer and the job worker would be additional paper work. It is basically to avoid such a situation the procedure under Rule 57F(3) has been enacted. As rightly observed by the earlier decision's the mechanical application of Rule 57C which destroys the basic benefit intended to be extended to the assessee should be avoided. If the interpretation adopted by the revenue is upheld, the benefit otherwise intended to be given will get frustrated apart from leading to discriminatory situation, where the manufacturer has himself processed the inputs and in the other case were he is sending it to the job worker.
3. We are also in agreement with the appellant's contention that Rule 57C debars taking of credit in respect of the inputs used in the manufacture of the final product, if final product is exempted from the whole of duty of excise leviable thereon or chargeable to nil rate of duty. As such, to attract the provisions of Rule 57C, two situations in respect of the final product should be satisfied. Either the final product should be exempted, which situation can arise only when there is an exemption notification issued under Section 5A of the Central Excise Act or the final product is chargeable to nil rate of duty. Expression chargeable to nil rate of duty or exempted from whole of duty was considered by the Tribunal in the case of Orissa Synthetics Ltd. v. Collector of Central Ex. [1995 (77) E.L.T. 350 (Tri.)] and after taking note of the Ministries clarifications issued vide Circular No. 10/75/CX. 6, it was held that clearance under goods under provision of 191BB for export without payment of duty would not get covered by the above expression. Reference was made to the advice received from the Ministry of Law dealt in the paragraph of 9 in the said decision. It was opined in the said letter of the Law Ministry that the term 'exempted' has a definite connotation. The same as attributed to the notification issued by the Central Government. Similarly, the chargeable to nil rate of duty would refer to the tariff rate being nil and the goods cleared in terms of provision of Rule 199BB would not be covered by the said expression inasmuch as the same are not chargeable to nil rate. In the present case, we find the job worker could have cleared the goods on payment of duty and manufacturer could have claimed credit of the same. It is only under the special procedure laid down in
5|Page E/10137,10194,10198,10341-10350/2014,E/14115/2013-DB terms of the Rule 57F(3) that the duty does not get paid at the job worker's end at the time of clearance of the goods, but ultimately gets paid at the manufacturer's end. In these circumstances, we are in agreement with the decision rendered in the case of Bajaj Tempo and Jindal Polymers.
3. Apart from the above two decisions, we also note that identical view was taken in the case of Shakti Insulated Wires Ltd. v. CCE & C, Mumbai-V [2002 (149) E.L.T. 668 (Tri.) = 2002 (51) RLT 115 (CEGAT-Mum)] & also in the case of CCEx, Jaipur v. Noorani Textiles Mills [2000 (122) E.L.T. 744 (Tribunal)].
4. In only case of Escorts Ltd. v. CC Ex, Delhi [2003 (160) E.L.T. 623 (Tri-Del.)] while interpreting Rule 57C of the Central Excise Rules, the Tribunal rejected the appellants claim of Modvat credit of duty paid on the inputs used in the manufacture of the parts, which were cleared without payment of duty to, appellant's other unit under Chapter X procedure and utilised in the manufacture of tractor which were cleared on payment of duty by observing that since no duty was paid on the part at the time of clearance, Rule 57C will apply and no Modvat credit would be admissible. However, the said decision was subsequently reversed by the Supreme Court as reported in Escort v. C.C.Ex. [2004 (171) E.L.T. 145 (S.C.)]. For appreciation, we reproduce paragraphs 8 & 9 of the said decision.
"8. It is to be seen that the whole purpose of the Notification and the Rules is to streamlines the process of payment of duty and to prevent the cascading effect if duty is levied both on the inputs and the finished goods. Rule 57D(2), which has been extracted hereinabove, shows that in the manufacture of a final product an intermediate product may also come into existence. Thus in cases where intermediate product may also come into existence. Thus in cases where intermediate product comes into existence, even though no duty has been chargeable to Nil rate of duty, credit would still be allowed so long as duty is paid on the final product.
9. In cases of manufacturers like the Appellants the final product is the tractor. The intermediate product would be parts which are manufactured for being used in the tractor. In such a case the parts would not be the final product. Thus Rule 57C would have no application. The mere fact that the parts are cleared from one factory of the Appellants to another factory of the Appellants would not disentitle the Appellant from claiming benefit of Notification No. 217/86-C.E., dated 2nd April, 1986. As stated above, the Notification itself clarifies that the inputs can be used within the factory of production or in any other factory of the same manufacturer."
By applying the ratio of the above decision, it becomes clear that Modvat credit of duty paid on the inputs used in the manufacture of final product cleared without payment of duty for further utilisation in the manufacture of final product, which are cleared on payment of duty by the principal manufacturer, would not be hit by provision of Rule 57C. Inasmuch as, the matter stands decided by the Honourable Supreme Court, we would hold in favour of assessee.
5. As regards the decision in the case of Alpha Lavan laying down that the Modvat credit could be claimed in such a situation, we find the earlier decision of the Bajaj Auto was not followed. However, in view of the facts that the ratio of Bajaj Auto decision stands approved by the Supreme Court decision in the case of Escort Ltd. referred supra, we are of the view that the Alpha Lavan is no longer good law.
6. In view of the foregoing, we answer the reference in favour of the assessee. The papers may be placed before the original Bench for passing the appropriate orders."
6. In view of the 3rd Proviso to Rule 3(1) of Cenvat Credit Rules, 2004 and the Larger Bench judgment in the case of Sterlite Industries (supra), the issue is no more res-integra, accordingly, the impugned orders setting aside the demand are legal and correct which do not
6|Page E/10137,10194,10198,10341-10350/2014,E/14115/2013-DB need any interference. We, therefore, upheld the impugned order and dismiss the Revenue's appeals.
(Pronounced in the open court on 28.06.2018)
(Raju) (Ramesh Nair)
Member (Technical) Member (Judicial)
Neha