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2015 (8) TMI 308 - KARNATAKA HIGH COURT

2015 (8) TMI 308 - KARNATAKA HIGH COURT - 2016 (42) S.T.R. 427 (Kar.) , 2016 (334) E.L.T. 476 (Kar.) , [2016] 90 VST 431 (Kar) - Availability of Cenvat Credit of Service Tax paid on Exempted Services of Job work - process of chrome plating - Business auxiliary service - Notification No. 8/2005-ST, dated 01-03-2005 - Held that:- A bare reading of this notification denotes that this notification is issued under section 93(1) of the Finance Act, 1994 which exempts the taxable services of production .....

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propriate duty of excise is payable. - Notification is condition precedent. - Section 5A(1A) of the Central Excise Act provides for power to grant exemption from duty of excise. Section 5A(1A) of the Central Excise Act specifically provides that "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 thereon has been granted absolutely, the manufacturer of such excisable go .....

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e present case. - no interference is called for with the well reasoned order of the Tribunal - Decided against Revenue. - CEA NO..25/2012 AND CEA NOS.26-28/2012 - Dated:- 1-4-2015 - VINEET SARAN AND MRS. S. SUJATHA, JJ. For The Appellant : Y. Hariprasad, Sr. CGSC For The Respondent : G. Shivadass and Siddartha, Advs. JUDGMENT Mrs. S. Sujatha, J. - These appeals are filed by the Department challenging the common order passed by the CESTAT, South Zonal Bench at Bangalore, dated 12-01-2012, wherein .....

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eriod between April 2007 to January 2008, FMTPR had availed inadmissible CENVAT credit of service tax paid on the activity of chrome plating done by their sister concern on job work basis under cover of material movement challans, without reversing the CENVAT credit availed thereon. FMGIL had returned the goods after completion of process of chrome plating to FMTPR under cover of an invoice on payment of service tax on the value of job work charges and further, the said goods received from FMTPR .....

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f excise is discharged by the principal manufacturer. FMGIL, job worker, without availing this notification had paid the service tax and passed on the benefit of CENVAT credit to FMTPR. On gathering this information, the authorities issued show cause notices demanding inadmissible CENVAT credit of service tax of ₹ 2,02,00,725/- availed by the FMTPR for the period from April 2007 to June 2008 and proposing to demand ₹ 6,11,96,239/-from FMGIL. These show cause notices were adjudicated .....

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2.01.2012 is impugned in these appeals by the Department. The questions of law raised in these appeals are as follows: "1. Whether the Tribunal is correct in allowing the appeal filed by the assessee without appreciating the fact that M/s. Federal Mogul Goetze India Ltd., the job worker, has irregularly availed CENVAT Credit and wrongly paid Central Excise Duty/Service Tax, so as to enable their sister concern i.e., M/s. Federal Mogul TPR India Ltd., to avail inadmissible credit thereby giv .....

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he Respondent in paying central excise duty/service tax on wholly excepted goods, with an intention to pass on the unintended benefit of the credit to their principal manufacturer, is a violation of Section 5A(1A) of Central Excise Act or not?" 4. Learned Counsel Shri Hariprasad appearing for the revenue contended that FMTPR had sent CENVAT Credit availed goods viz., Piston Rings in Coil Form to their sister concern for Chrome Plating on job work basis under cover to material movement chall .....

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leared on payment of duty. 5. It was argued that the process of chrome plating does not amount to manufacture in terms of Section 2(f) of the Central Excise Act, 1944 and it is an activity covered under the category of 'business auxiliary service' and liable for payment of service tax. However, in view of Notification No. 8/2005-ST, dated 01-03-2005, the job work which does not amount to manufacture was exempted from payment of service tax, provided the job worked goods are further used .....

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otification No. 8/2005 is an unconditional notification and the provisions of Section 5A(1A) of the Central Excise Act are applicable to the facts of the case, the Tribunal without considering the same, had wrongly allowed the appeals filed by the assessee. 7. Learned counsel Shri Shivadass, appearing for the respondent contended that the exemption Notification No. 8 of 2005 dated 01-03-2005 is a conditional notification and the provisions of section 5A(1A) of the Central Excise Act, are not app .....

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xemption notification, the job worker, FMGIL need not compulsorily opt for availing the exemption notification. In such circumstances, the Tribunal has rightly concluded that the said Notification No. 8 of 2005 dated 01-03-2005 is a conditional notification, not falling under Section 5A(1A) of Central Excise Tax Act and there is no compulsion on the assessee i.e., the job worker, FMGIL to avail the benefit of the exemption notification. 8. After hearing the learned counsel for the parties and pe .....

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tion of goods on behalf of the client referred in sub-clause (v) of clause (19) of section 65 of the said Finance Act, from the whole of service tax leviable thereon under section 66 of the said Finance Act: Provided that the said exemption shall apply only in cases where such goods are produced using raw materials or semi-finished goods-supplied by the client and goods so produced are returned back to the said client for use in or in relation to manufacture of any other goods falling under the .....

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meaning of clause (f) of section 2 of the Central Excise Act, 1944 (1 of 1944); (ii) "appropriate duty of excise" shall not include 'Nil' rate of duty or duty of excise wholly exempt.' 9. A bare reading of this notification denotes that this notification is issued under section 93(1) of the Finance Act, 1994 which exempts the taxable services of production of goods on behalf of the principal manufacturer from the whole of service tax leviable under Section 66 of the Financ .....

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fication shall be subject to the condition stipulated therein i.e., the principal manufacturer discharging the liability of appropriate duty of excise on these manufactured goods. Any job worker who undertakes services of processing is not free to avail the benefit of the said notification unless the recipient of the services pays appropriate duty of excise on the goods returned back by the job worker. This condition of payment of appropriate duty of excise by the recipient i.e., the principal m .....

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