TMI Blog2023 (9) TMI 1096X X X X Extracts X X X X X X X X Extracts X X X X ..... inal 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 at a different location - the notification requires an undertaking by the principal manufacturer to ensure that the goods manufactured / processed by the job worker are not diverted and proper duty is paid thereon. In the instant case, the entire activity is undertaken within the premises of the principal manufacturer, therefore much of the procedure loose significance. The appellants have not specifically claimed the benefit of 214/86 and have not followed the procedure prescribed for availing the Notification. The procedure not followed by them relates to the making of challans for movement of goods and obtaining an undertaking from the principal manufacturer regarding payment of duty on the finished goods. In the instant case, since the goods remain within the premises of principal manufacturer the need of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 terms of Rule 6(2) of Cenvat Credit Rules, 2004. The said demand for reversal of cenvat credit was upheld by the Commissioner (Appeals) and as a result, the appellants are in appeal before this Tribunal. 4. Learned counsel argued that the activity carried out by the appellants viz. fabrication of ACN Reactor in the premises of M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. He argued that there was no suppression or mis-declaration on their part and therefore, extended period of limitation could not have been invoked. He argued that it has been held by Hon ble Supreme Court in the case of Hindustan Steel Limited AIR 1970 (SC) 253 and followed by Tribunal in the case of Kellner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory 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 at a different location. The goods have to move from principal manufacturer to the premises of job worker and the goods are required to be returned from the premises of job worker to the principal manufacturer, for all this movement, Notification 214/86-CE prescribes challans etc. and the time period within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per 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. Expressio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequently 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 fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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