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TMI Blog2023 (9) TMI 1096X X X X Extracts X X X X X X X X Extracts X X X X ..... ffshore platform and jackets and ship building. Learned counsel pointed out that they had sub contracted some work to M/s Neetu Engineering, Surat and M/s Ebenezer Engineering, Surat. The sub-contractors completed the work and charged the service tax to the appellant and the appellant availed the cenvat credit of the said service tax charged by the sub-contractors. The current issue involved is the demand of the cenvat credit availed by the appellants on these services obtained from the sub-contractors. 3. Learned counsel pointed out that during the course of CERA Audit, it was noticed that the appellant had raised the bills to M/s L&T, Hazira but not charged the service tax amount on the same, whereas when the sub-contractor had raised the bills to the appellant they had charged the service tax. The revenue was of the view that since the activity of the appellant did not attract service tax, the appellant could not have availed the cenvat credit on input service used for their output service in terms of Rule 6(1) and 6(2) of Cenvat Credit Rules, 2004. Consequently, a show cause notice was issued to the appellant demanding reversal of cenvat credit availed by the appellant in term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T, Rajkot 2002 (8) TMI 1153 Banco Aluminium Ltd. v. CCE & ST, Vadodara, 2020 (10) TMI 756 Shree Organi Chemicals, Ahmedabad v CCE & ST, Ahmedabad 2019 (2)TMI 852 CCE & ST Rajkot v DM Brass Extrusion & Ors. 2018 (6) TMI 1420 7. Learned counsel further claimed that Rule 6 of Cenvat Credit Rules, 2004 is not applicable to the present case. Learned counsel argued that Rule 6 of the Cenvat Credit Rules prescribes that no cenvat credit can be availed on inputs, input services which are used for performing exempted activity. He argued that activity carried out by them is amounts to manufacture and is normally taxable but by virtue of Notification 67/1995-CE, the appellants are not required to pay excise duty. He argued that this fact will not render the activity undertaken by them as exempted. 8. Learned counsel further argued that extended period of limitation has been invoked to deny cenvat credit. He argued that they have been regularly filing ST-3 Returns and have paid applicable tax on taxable services provided by them. Learned counsel argued that they had bonafide belief that the services were not taxable and service tax was not payable on the services provided by them. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, a new product has emerged as a result of the process of manufacture. 12. It is not in dispute that the entire activity has been carried out within the premises of M/s L&T Limited, Hazira and that M/s L&T Limited, Hazira has discharged the duty liability on the final product cleared by them from their factory premises. The process undertaken by the appellants is a process incidental or ancillary to the final manufacture of the finished goods cleared by M/s L&T Limited, Hazira. In the above background, it cannot be denied that the activity undertaken by the appellants is an activity of manufacture. 13. Notification 214/86-CE grants exemption from central excise duty on certain activities which are undertaken by a job worker and where the principal manufacturer undertakes to pay the central excise duty on the final products cleared by them. The notification 214/86-CE prescribes detailed procedure for movement of goods and for the principal manufacturer to discharge the duty liability on the final products. The entire procedure prescribed under Notification 214/86-CE is a procedure which takes care of situation where the job worker is located away from the principal manufacturer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... '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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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