TMI Blog2017 (12) TMI 266X X X X Extracts X X X X X X X X Extracts X X X X ..... t of duty. Notably it is not the case of the appellant that the Principal manufacturer paid duty at anytime as the goods manufactured by him were exempted from duty. Thus the liability for payment of duty on such intermediate goods manufactured by the Jobworker is on jobworker only. The Jobworker, M/s Thermax being manufacturer of excisable goods is liable to pay duty on the intermediate goods manufactured by him on jobwork basis which supplied to their principal M/s Thermax Babcock - appeal dismissed - decided against appellant. - E/519 & 520/06-Mum - I/26-27/2017 - Dated:- 27-11-2017 - Mr. D. N. Panda, Judicial Member, Mr. Ramesh Nair, Judicial Member And Mr. Raju, Technical Member S/Shri Gajendra Jain and Rajesh Ostal, Advocates, for appellant Shri Hitesh Shah, Commissioner (AR), for respondent ORDER Per: Remesh Nair Learned advocate appearing for both the appellants submits that while hearing appeal of the principal manufacturer M/s. Thermax Babcock Wilcox Ltd. (hereinafter referred to as Babcock ) and the job worker M/s. Thermax Ltd. (hereinafter referred to as Thermax) , the Division Bench was of opinion that the provisions of Rule 4(5)(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods for it. Revenue alleged that there shall be duty liability on Thermax (the job worker) in terms of Rule 4(5)(a) of the 2001 Rules and 2002 Rules on the ground that the appellants failed to follow the procedure prescribed by Notification No.214/86-CE dated 25.3.1986. Against such allegation defence of appellants was that Thermax has not followed the process of Notification 214/86-CE dated 25.3.1986 and has not taken benefit thereof. The referring Bench found in clear terms that Babcock (the principal manufacturer) had not paid duty on the intermediate, clearing final product exempt from duty under a different notification. So also, Thermax (the job worker) did not pay duty on the intermediate manufactured by it for Babcock. Examination of the reference Bench was confined to the fact situation pleaded by the appellant before learned adjudicating authority that it has not followed the procedure prescribed by Notification No. 214/86-CE dated 25.03.1986. 4.1 Appellant submits that Rule 4(5)(a) of the Cenvat Credit Rules, 2001 and 2002 requires that the principal manufacturer can clear the inputs to a job worker and avail cenvat credit thereon. Rule 4(6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay duty on intermediate goods which can be inferred from the implications of the provisions contained thereon as has been held by Tribunal in the case of M. Tex D.K. Processors (P) Ltd. Vs. CCE, Jaipur - 2001 (136) ELT 73 (Tri.-Del). Appellants further says that when two Members of the Bench hearing the said case differed in their opinion, that was referred to a Third Member who ultimately agreeing with one of the Members of the Bench (Vice-President) held that a job worker by necessary implication is not liable to duty and against Revenue. When that decision was appealed by Revenue before Apex Court, that was dismissed as reported in 2002 (146) ELT A309 (SC) on the averment of Revenue that in terms of CBE C circular No. 306/22/97-CX dated 20.3.1997, job worker is relieved from duty liability. The said circular reads as under: Modvat credit Inputs used by job workers in job working contracts Subject : Availability of Modvat credit on inputs used by job workers in job-working contracts - Regarding. Instances have come to the notice of the Board where job workers have availed the credit on inputs used for job-work done by them under the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 According to appellant, the reference related to the period September 2001 to June 2002. Accordingly that is governed partly by the provisions of 2001 Rules and partly by 2002 Rules . Therefore to the extent the 2002 Rules are applicable, appellant submits that it adopts the same argument as that has been made above in respect of applicability of 2001 Rules. 5. Revenue, per contra, submits that Thermax is holding company and Babcock is a subsidiary thereof. Both units were situated at the same place at the material time. The facts on record demonstrate that Babcock (principal manufacturer) received input and took credit of the excise duty paid thereon and removed such input to Thermax (job worker) for use in the manufacture of intermediate goods for it for ultimate use thereof in manufacture of final product by Babcock . Thermax as a job worker manufactured boiler parts for Babcock using the inputs supplied by it and cleared the same. Babcock did not undertake any manufacturing process on the job worked goods supplied by :Thermax (job worker) for which, Babcock was neither manufacturer of the intermediate nor paid duty thereon . Accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rolling Mills Vs. CCE, Delhi - 2000 (122) ELT 481 (Tri.-Delhi) to say that following of procedure prescribed by Notification 214/86-CE dated 25.3.1986 is mandatory for the principal manufacturer as well as job worker to clear the job worked goods without duty by a job worker. In a batch of appeals in Desh Rolling Mills case (supra) such principle was laid down on the finding of fact there was evidence of payment of duty by the principal manufacturer on the intermediate goods cleared by job worker duty free. This ruling establishes that mandate of Notification No.214/86-CE i s to be followed and this Bench has consistently held so applying the same principle laid down in cateno of cases. Similarly in the case of Kartar Rolling Mills Vs. CCE, New Delhi - 2006 (197) 151 (SC), Apex Court held that following of the procedures required by Notification No.214/86-CE is pre-requisite and that being the mandate of law, intermediate goods are allowed to be cleared without payment of duty. Thus mandate of that notification cannot be given go bye. Parties have to prove on record that the supplier of raw material ultimately pays duty on the final product manufactured out of the duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7F(4) of the Central Excise Rules, 1944. Therefore the decisions of Tribunal rendered thereon, shall not be applicable to the cases governed by the present Rule 4(5)(a) of the 2001 Rules and for similar such provisions in the 2002 Rules . 5.7 Placing reliance on the decision in the case of Mahindra Mahindra Ltd. Vs. CCE, Mumbai - 2007 (211) ELT 481 (Tri.-Mumbai) as well as Kriti Industries (I) Ltd. Vs. CCE, Indore - 2017 (350) ELT 257 (Tri.-LB), to submit that payment of 8% and 10% levy by principal manufacturer under Rule 6(3) of Cenvat Credit Rules, 2001 is not a duty paid under law for which there cannot be further demand of duty on intermediate from principal manufacturer, learned AR of Revenue repels such argument of appellants on the ground that payment of 8% or 10% amount as the case may be, by the principal manufacturer under Rule 6(3) of the Cenvat Credit Rules, 2001 and 2002 is of no avail since that has no character of duty. Accordingly, the plea of appellant that the term ' duty' having its own meaning and character, any other payment cannot be equated with it to get consideration under law. 5.8 At this stage, learned counsel for appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty is on the goods manufactured. Therefore the job worker Thermax having manufactured the goods for Babcock, is liable to duty on the intermediate manufactured by it. To claim no duty liability by Thermax on the intermediate, it was required to satisfy the condition of Rule 4(5)(a) of the Cenvat Credit Rules, 2001 read with Notification No. 214/86-CE dated 25.3.1986 issued under Section 5A of the Central Excise Act, 1944 Accordingly, the job worker was required to satisfy the conditions of the said notification to get exemption from duty. Appellant's entire claim that the job worked goods by Thermax would not suffer duty is devoid of merit for which both the appeals are liabe to be dismissed. Further, appellants plea that Rule 4(5)(a) of 2001 Rules and 2002 Rules grants exemption to job worker is baseless. 5.11 Learned AR for Revenue further explains that appellants proposition that where the principal manufacturer discharges duty liability on the intermediate goods, that absolves job worker from such liability shall not be disputed unless such proposition is made with evidence of payment of duty by the principal. In the present case duty was not paid by B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pret law for their convenience which should not be permitted. 6.1 Appellant further says that Dhana Singh Synthetics case (supra) was decided on the context of Rule 4(5)(a) of Cenvat Credit Rules, 2001 and cannot be said to be a decision under the earlier Rule 57F(4) of Central Excise Rules, 1944. Revenue discards such plea relying on decision in Kartar Rolling Mills (supra) as well as Desh Rolling Mills (supra) stating that those were decided in the context of Rule 57F(2) and held that compliance to Notification 214/86-CE dated 25.03.1986 is mandatory. The duty not paid on input not being taken credit in Desh Rolling Mills case (supra), Tribunal held that there is no necessity of further liability since the inputs were duty free inputs. So the contention of Revenue is that Desh Rolling Mills (supra) shall not apply has no relevance. 6.2 Appellant in its rejoinder further explains that the decision of Tribunal in the case of Sterlite Industries (I) Ltd. reported in 2005 (183) ELT 353 (Tri.-LB), having reached to finality by the Hon'ble Bombay High Court as reported in 2009 (244) ELT A89 (Bom.). Revenue's all contentions fail to stand wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 214/86-CE is not the mandate of law for which appellant relies on RSWH Ltd. 2014 (343) ELT 1041 (Tri.-Del.), to submit that Rule 4(5)(a) is a procedural law without casting any liability on appellant. So also the decision of the Apex Court in Ujagar Prints (supra) has no relevance to the present case. But such contention of appellant is discarded by Revenue on the ground that appellants have misinterpreted law to their advantage. 7. The fact that M/s. Thermax Babcock was Principal manufacturer who removed inputs to M/s Thermax (jobworker) for manufacturing of intermediate goods i.e boiler parts which were to be used by the Principal Manufacturer in the manufacture of final product remained undisputed. M/s. Thermax as a jobworker manufactured boiler parts for M/s. Thermax Babcock using the inputs supplied to it and cleared the same back to M/s. Thermax Babcock who used such intermediate goods in manufacture of final products but did not pay any duty on clearance of such final products. 7.1 The term manufacture is defined under Section 2 (f) of the Central Excise Act which includes any process (i) Incidental or ancillary to the completion of a manufactured pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e duty of excise leviable thereon : Provided that, unless specifically provided in such notification, no exemption therein shall apply to excisable goods which are produced or manufactured- (i) in a [free trade zone [or a special economic zone]] and brought to any other place in India; or (ii) by a hundred per cent export-oriented undertaking and (ii) [brought to any place in India]. Explanation . In this proviso, [ free trade zone , [ special economic zone ]] and hundred per cent export-oriented undertaking shall have the same meanings as in Explanation 2 to sub-section (1) of section 3. [(1A) 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 goods shall not pay the duty of excise on such goods.] [(2) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by special order in each case, exempt from payment of duty of excise, under circumstances of an exceptional nature to be stated in such order, any excisabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . That does not vest any power to grant exemption from payment of duty. Thus the applicability of Rule 4 (5) and (6) to grant exemption to the assessee i.e job-worker from payment of duty is inconceivable. 7.4 An exemption to jobworker is provided only in terms Notification No. 214/86 dt. 15.03.1986 issued under Rule 8 (1) of Central Excise Rules, 1944 in terms of Section 5A. The Notification No. 214/86 CE dt. 25.03.1986 which provides exemption to the jobworker from payment of duty on goods received from Principal manufacturer reads as under : Specified goods manufactured in a factory as a job work and used in the manufacture of final products In exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts goods specified in column (1) of the Table hereto annexed (hereinafter referred to as the said goods) manufactured in a factory as a job work and :- (a) used in relation to the manufacture of final products, specified in column (2) of the said Table, (i) on which duty of excise is leviable in whole or in part; or (ii) for removal to a unit in a free trade zone or to a hundred per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment of India in the Ministry of Finance (Department of Revenue), No. 108/95-Central Excises, dated the 28th August, 1995; or . (c) removed on payment of duty for home consumption from his factory, or (d) used in the manufacture of goods of the description specified in column (1) of the table hereto annexed by another job worker for further used in any of the manner provided in clause (a), (b) and (c) as above. (ii) the said supplier produces evidence that the said goods have been used or removed in the manner prescribed above ; and (iii) the said supplier undertakes the responsibilities of discharging the liabilities in respect of Central Excise Duty leviable on the final products. Explanation I.For the purposes of this notification, the expression job work means processing or working upon of raw materials or semi-finished goods supplied to the job worker, so as to complete a part or whole of the process resulting in the manufacture or finishing of an article or any operation which is essential for the aforesaid process. Explanation II shall be omitted. (vide Notification No. 33/2000-C.E. dt. 31.03.2000) TABLE Descri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of duty or for export, under Bond. The Rule 4 (5) (a) and Rule 4 (6) of Cenvat Credit Rules, 2001 and 2002 relied upon by the Appellant in support of their contention read as under : Rule 4(5)(a) - The CENVAT credit on inputs shall be allowed even if any inputs as such or after being partially processed are sent to a job worker for further processing, testing, repairing, re-conditioning or any other purpose, and it is established from the records, challans or memos or any other document produced by the assessee taking the CENVAT credit that the goods are received back in the factory within one hundred and eighty days, the manufacturer 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 can take the CENVAT credit again when the inputs or capital goods are received back in his factory Rule 4(6) The Commissioner of Central Excise having jurisdiction over the factory of the manufacturer of the final products who has sent the input or partially processed inputs outside his factory to a job-worker may, by an order, which shall be valid for a financial year, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ownership of the goods is immaterial for the purpose of levy of duty and thus any person who has undertaken the activity of manufacture is liable to pay duty. In order to save the jobworker from payment of duty the Principal manufacture has to own the liability to pay such duty. It is only by virtue of the Notification No.214/86 CE dt. 25.03.1986 that the liability of the jobworker to pay duty is transferred to the Principal manufacturer who undertakes to pay duty. 7.7 The intention of enactment of Notification(supra) was to shift the liability of payment of duty from jobworker to the Principal manufacturer under certain conditions as provided in the said notification. There is no blanket machinery provisions in the central excise law under which the liability to pay duty is transferred from the job work manufacturer to another person i.e Principal manufacturer. However when the Principal manufacturer does not own up the liability to pay duty on finished goods, the provision of Notification No. 214/86 CE dt. 25.03.1986 does not apply. In that case, it is the ultimate manufacturer i.e the jobworker who has to pay the duty. Following the procedure and conditions of the Notificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at no duty is liable to be paid by the Jobworker. The jobworker was exempted from payment of duty in case where the goods arising out of job work were to be used by the Principal manufacturer either in the manufacture of goods on which duty was paid by him or were to be cleared as such on payment of duty. The said situation given in Rule(supra) cannot be equated with the present situation as Rule 4 (5) (a) not being concerned with payment of duty but only limited to sending of cenvated inputs to the jobworker. 7.10 In the present case the fact remains is that neither the goods after jobwork were cleared as such on payment of duty nor were used in manufacture of dutiable final products by the Principal manufacturer. Hence the duty liability would be on the real manufacturer of goods i.e the Jobworker. Since the Principal manufacturer pays the duty on the product arising out of manufacture even at the jobworkers end, he is eligible to avail credit. The Rule 4 (5) (a) thus is a facility to the principal manufacture to send goods for jobwork on which cenvat has been availed. It is nothing to do with the duty payment of goods. 7.11 Rule 4 (6) is a facility to the Principal manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and have carefully perused the same. The language in both these Rules gives no scope to infer that if the job worker was not required to pay duty in terms of Rule 57F(4) it could be required to pay duty in terms of Rule 4(5)(a) because the conditions of Rule 57F(4) of Central Excise Rules, 1944 were stringent compared to the conditions of Rule 4(5)(a) of the Cenvat Credit Rules inasmuch as Rule 57F(4) categorically required the principal manufacturer to use the goods received from the job worker for further use in the manufacture of the final product or removing after payment of duty for home consumption or removing the same without payment of duty for export while Rule 4(5)(a) does not say so expressly though it is implicit therein. Thus, we are of the view that for the purpose of dutibility at the hands of the job worker, the provisions of Rule 57F(4) of Central Excise Rules, 1944 are essentially pari materia the Provisions of Rule 4(5)(a) of the Cenvat Credit Rules. Indeed vide judgments in the case Mukesh Industries Ltd. v. CCE, (supra) CESTAT essentially held as under : Duty liability - Job worker - Respondents receiving grey MMF and knitted or crocheted fabrics from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and had also not opted to avail the benefit of Notification No.214/86-CE Hence the liability of is on the manufacturer of intermediate product, i.e. job worker in the present case. 7.15 The reliance placed upon the Circular No.306/22/97/ - CX dt. 20.03.1997 is also misplaced since the circular was with reference to the situation upon eligibility of the jobworker to claim credit where no duty was paid by them. However the facts of the present case are different as it deals with the situation as to who should be liable to pay duty when the Principal manufacture is not discharging duty either on jobwork goods or on final products in which such jobwork goods are consumed. In such case the responsibility lies the Jobworker who is the ultimate manufacturer of the goods to discharge the excise duty. 7.16 Revenue has placed reliance upon the Tribunal judgment in case of M/s Facit Asia Ltd. Vs. CCE - 1991 (54) ELT 347 (TRI). Tribunal was seized of the question as to whether the duty paid by the jobworker is available to the Principal manufacturer when the jobworker could have availed exemption under Notification No. 214/ 86 CE. The Tribunal rightly held that if the jobworker h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught on record by the Appellants only refer to the movement of excisable goods under rule 57F(2). In view of this, the reliance placed by the Appellants on the observation of the Tribunal in respect of Notification 214/86 in the remand order is not tenable. We also observe that the Tribunal directed the Adjudicating Authority to decide the matter in the light of the observations and also according to the law. Notification No. 214/86 nowhere provides that the supplier of the raw material will be liable to pay the duty on the goods manufactured as a job work. Para 2 of the Notification No. 214/86 speaks of the liability of the supplier for discharging the duty leviable on the finished products and not on the goods manufactured on job work basis. The Adjudicating authority has rightly relied upon the decision in the case of Jina Bakul Forge Pvt. Ltd (supra). Accordingly, we uphold the demand of Central Excise Duty as confirmed by the Commissioner (Appeals) in the impugned Orders. 7.19 The Hon'ble Apex Court in case of M/s Kartar Rolling Mills Vs. Commissioner of Central Excise, New Delhi - 2006 (197) ELT 151 (SC) held that the assessee jobworker i.e the Appellant failed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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