TMI Blog2015 (9) TMI 984X X X X Extracts X X X X X X X X Extracts X X X X ..... ided in favour of assessee. - Appeal No. E/786/12-MUM, E/85055/13-MUM - - - Dated:- 15-1-2015 - Hon ble Mr. Ramesh Nair, Member (Judicial), J. For the Appellant : Miss Padmavati Patil, Adv For the Respondent : Shri Rakesh Goyal, Addl. Commissioner (AR) ORDER Per Ramesh Nair Two appeals are directed against Orders-in-Appeal Nos. BC/281/MUM-III/2012-13 dtd. 25/9/2012 and BC/361/MUM-III/2011-12 dtd 29/9/2012 both passed by the Commissioner of Central Excise (Appeals) Mumbai-III, wherein the Ld. Commissioner (Appeals) sustained the orders in original Nos. 57/RG/2011-12 dated 4/10/2011 and 231/11-12/DC/W-I/M-III dated 13/6/2012 respectively and appeals of the appellants were rejected. The fact of the case is that the appellant M/s. Tapasya Engineering Works Pvt. Ltd. Unit II are engaged in the job work of their own another unit i.e. M/s Tapasya Engineering Works Pvt. Ltd. Unit I. The appellants are also registered as Central Excise assessee and filing the return. They availed the Cenvat Credit of service tax of various services like Rent charges, Security charges and Telephone charges and Inspection charges. The Revenue issued the show cause notice, wherein Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed the Cenvat credit to the appellant. 4. I have carefully considered the submissions made by both the sides and perused the record. 5. The issue whether job worker is manufacturer or other wise can be ascertained from the definition provided under Section 2F of Central Excise Act, 1944 and Rule 2(n) of Cenvat Credit Rule 2004 which are reproduced below: 2(f) of Central Excise Act, 1944 Section 2. Definitions - IN this Act, unless there is anything repugnant in the subject or context,- (a) ----- (aa) ----- (aaa) ----- (b) ----- (c) ----- (d) ------ (e) ----- (ee) ------ f) manufacture includes any process,- (i) incidental or ancillary to the completion of a manufactured product; (ii) which is specified in relation to any goods in, the Section or Chapter notes of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture; or (iii) which, in relation to any goods specified in the Third Schedule , involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods (exempt under Nofn. No. 214/86-C.E.)is admissible to the appellant or not in view of the provisions contained in Rule 6(1) of the Cenvat Credit Rules, 2004. The demand has been confirmed against the appellant on the grounds that Service Tax credit proportionate to the services used in the manufacture of exempted goods under Notification No. 214/86-C.E., dated 25-3-1986, is not admissible. From the case laws relied upon by the appellant, it is observed that the issue is no more res integra and has been decided by the Larger Bench in the case of Sterlite Industries (I) Limited v. CCE, Pune (supra) by holding that credit availed by the job worker cannot be denied where inputs were used in the manufacture of goods which were cleared without payment of duty under Notification No. 217/86-C.E. In this judgment the Larger Bench approved the law laid down by CESTAT in the case of Jindal Polymers [2001 (43) RLT 680 (Tri.-Del.) = 2001 (135) E.L.T. 657 (Tri.-Del.)]. We find that in the matter of Jindal Polymers (supra), a division of Jindal Polyester Ltd., were engaged in the manufacture of polyester/polymer chips falling under Chapter 39 on job work basis for Jindal Polyester Ltd. They ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 214/86-C.E. as per the decisions of this Bench in the case of Polycab Industries v. CCE, Daman (supra), and Laakoonaa Reactions v. CCE, Ahmedabad-I (supra). 6.3 The Revenue has also argued that the production or processing of raw materials, which amounted to manufacture in terms of Section 2(f) of the Central Excise Act, 1944, was an exempted or non-taxable service during the material period as per Rule 2(e) of the Cenvat Credit Rules, 2004, and hence Cenvat Credit of input services was not available to the appellant for rendering non-taxable or exempted output service viz. production or processing of raw materials' amounting to manufacture. In this context we find that the job work activity of the appellant is amounting to manufacture and is not one of providing any service'. The appellant factory cannot be both a manufacturer' and a service provider' at the same time in relation to a particular activity. It is settled proposition in Central Excise matters that a job worker is a manufacturer' and hence the appellant factory cannot be treated as a service provider rendering exempted/non-taxable service for the manufacturing activity. Therefore, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he various services availed, which stand utilized by them in the manufacture of goods on job work basis. After hearing both sides, I find that the issue is no more res integra and stand settled by Larger Bench decision of the Tribunal in case of Sterlite Industries(I) Ltd. - 2005 (183) E.L.T. 353 (Tri. - LB). This decision stand followed in appellant's own case being Order No. A/302/WZB/AHD/2009, dated 22-1-99. In addition, in the judgment in the case of Laakoonaa Reactions being Order No. A/497-498/WZB/AHD/2010, dated 13-5-10, the Tribunal has held that the duty paid on input services is admissible to the job worker clearing the goods to principal manufacturer under Notification No. 214/86-C.E. 2. In view of the above, I set aside the impugned order and allow the appeals with consequential relief to the appellants. In the case of M/s. Lakoonaa Reactions vs. CCE Ahmedabad (supra) this Tribunal held as under: 2. The appellant had cited the decision of the Larger Bench of the Tribunal in the case of M/s. Sterlite Industries Ltd. as reported in 2005 (183) ELT 353 (Tri-LB), in support of their contention that they are eligible to take credit of duty in respect inputs recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the said rule were being returned to the principal manufacturer who was paying duty on the same. Secondly, it weighed with the bench that the provision of Rule 57C would not get attracted inasmuch as the removal of the goods was neither under the exempted notification nor the goods were chargeable to nil rate of duty. For arriving at the above conclusion reliance was placed upon the earlier decision of the Tribunal of Bajaj Tempo. In the case of Bajaj Tempo, provision of Rule 57F as also provision of Rule 57C were considered in detail along with the consideration of Notification No. 217/86. It was observed that under Modvat scheme, credit of duty paid on notified inputs is to be given for payment of duty on the notified final products, if such inputs are used in or in relation to the manufacture of the final products and such inputs are not hit by exemption to Rule 57A. Notification No. 217/86 [which laid down the procedure for sending the basic raw material to the job worker's factory and receipt of the same in the manufacturer's factory after processing for further utilisation in the manufacture of the final products on which duty is paid by the manufacturer. The no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduct 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 sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduct 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 Lavanlaying down that the Modvat credit could be claimed in such a situation, we find the earlier decision of the Bajaj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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. From reading of the above provisions also it is explicitly clear that even in case of manufacture of goods on job work basis in terms of Notification No. 214/86-CE credit of Cenvat Credit of service tax is admissible. It is observed that the job worker subsequently returns the intermediate goods to the principal manufacturer and the said manufacturer is duty bound to clear the final product on payment of excise duty therefore right from initial raw-material upto the manufacture of final product at whatever stage input or input services is used to Cenvat Credit on all such input or input services is allowed. 5.1 In view settled legal position, the Cenvat credit in respect of input services availed by the appellant during the course of job work manufacture in terms of Notification No. 214/86-CE is correctly admissible to them. Therefore both the lower authorities have gravely erred in disallowing the credi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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