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TMI Blog2025 (2) TMI 1110X X X X Extracts X X X X X X X X Extracts X X X X ..... asting Services. The various equipments that the appellants install at the premises of the subscribers/customers as part of the CPEs, include the Set Top Boxes (STB), Smart Cards, Dish Antenna, Cables, Low Noise Block Down Converter and other accessories, which collectively constitute as CPEs. 1.2 For the purpose of rendering the broadcasting service, the appellants procure STBs, which are manufactured domestically in India. However, for completing the Conditional Access System (CAS), the appellants import Smart-Cards from the overseas suppliers located abroad. The imported Smart-Cards are tested and paired with the STBs. The appellants clear the said imported goods on payment of appropriate duties of Customs, including the Additional Duty (CVD) levied under Section 3 of the Customs Tariff Act, 1975. The CVD amount paid into the Government exchequer on the said imported goods was availed by the appellants as Cenvat Credit in terms of the CENVAT Credit Rules, 2004 (for short, referred to as "the Rules of 2004"), upon receipt and accounting for the same in their registered premises. Thereafter, the Smart-Cards are being sent to M/s. Trend Electronics Limited (STB manufacturer). 1.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCN dated 11.01.2019 was adjudicated vide the Order-in-Original No.4/ST/COMMR/2019-20 dated 04.07.2019 (for short, referred to as the "impugned order") by the learned Commissioner of GST, Aurangabad, in confirming the proposals made therein. In support of confirmation of the adjudged demands, the learned adjudicating authority has, inter alia, held that the appellants did not maintain proper records in respect of the Smart-Cards sent for job-work to the STB manufacturer, and as such, the provisions contained in Rule 3(5) of the Rules of 2004 have been contravened; that mere paring the barcode of a smart-card with that of STB by the STB manufacturer does not amount to job work, in order to fall within the scope and ambit of Rule 2(n) of the Rules of 2004; that the appellants' contention that they had removed the smart-cards for job-work is not acceptable inasmuch as the prescribed procedures under the statute were not followed for clearance of the said goods to the STB manufacturer; and that non-reversal of Cenvat credit is revenue neutral, as claimed by the appellants is not acceptable, as they had not followed the proper procedure for availment and utilization of Cenvat credit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same in the STBs and supply to the warehouses, the case of the appellants should squarely fall under the purview of Rule 4 (5) (a) of the Rules of 2004 and therefore, on removal of Smart-Cards to the job-worker's premises, the appellants were not required to reverse the Cenvat Credit availed thereon. In this context, learned Advocate has relied upon the judgement of Hon'ble Punjab & Haryana High Court, in the case of Principal Commissioner of Central Excise, Gurgaon -II Vs. Mitsubishi Electric Automotive India Pvt. Ltd. - 2023 (385) E.L.T. 514 (P&H) and the orders passed by the Co-ordinate Bench of the Tribunal, in the cases of Southern Lubrication (P) Ltd. Vs. Commr. of C. Ex. (Appeals), Bangalore - 2013 (295) E.L.T. 598 (Tri. - Bang.); Bharat Heavy Electricals Ltd. Vs. Commr. of C. Ex. & S.T., Meerut-I- 2014 (300) E.L.T. 442 (Tri.-Del.); Sam Turbo Industries Vs. Commissioner of C. Ex., Coimbatore - 2011 (269) E.L.T. 235 (Tri.-Chennai); and Federal Mogul Goetze India Limited Vs. Commr. of C.Ex., Bangalore - 2015 (318) E.L.T. 340 (Tri.-Bang). 3.3 By referring to the definition of "job-work", contained in Rule 2(n) of the Rules of 2004, learned Advocate has stated that such defini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the manufacture or finishing of an article or any operation which is essential for aforesaid process and the expression 'job worker' shall be construed accordingly. (ii) Rule 3(5): "When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, or premises of the provider of output service, the manufacturer of the final products or provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in rule 9: Provided that such payment shall not be required to be made where any inputs or capital goods are removed outside the premises of the provider of output service for providing the output service:....." (iii) Rule 4(5)(a): "(i) 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 and from there subsequently sent to another job worker and likewise, for further processing, testing, repairing, re-conditioning or for the manufacture of intermediate goods necessary for the manufacture of final products o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of final product or for provision of output service, and are diverted or used for any other purpose, then to counteract such eventualities, an embargo has also been created in the statute for not extending the benefit of CENVAT facility. One of the rules in the statute, creating such restriction is sub-rule (5) contained in Rule 3 ibid. It has been mandated therein that when the CENVAT availed inputs or capital goods are removed 'as such' from the factory, or premises of the output service provider, then the manufacturer or the service provider is statutorily required to pay an amount equal to the credit availed in respect of such inputs or capital goods. The legislative intent behind such prescription is to restrict availment of the credit facility, when the inputs/capital goods is not being used for the intended purpose. For such reason, it has been prescribed that the manufacturer or the service provider shall pay an amount equal to the CENVAT credit availed on such inputs or capital goods. In other words, when availment of such credit is ultimately reversed, the end result would be that, no CENVAT credit at all being taken with regard to inputs or capital goods, which were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and M/s NDS Limited in this case. The STB manufacturer pair the STB and smart-card as per the excel sheet in their master database, and push the same to the CAS database servers. That thereafter for rendering the DTH services the content transmitted is encrypted with data by the CAS at the head end and sent to the STB by ECM. The STB receive the encrypted signal and authorization to the card is sent via EMM through the distribution network. The card authorizes the subscribers to view the encrypted signal as per EMM. After authorization STB decrypts the signal which are available to the customers. The CAS is used for security and authorization (encryption, authorization and decryption). It authorizes the customers to see only those channels for which they are paying. That at the head end is the transmitting station where the signals and channels are received, processed and then transmitted. The signals are received in Digital video broadcasting satellite format where they are processed and converted to the desired formats and again transmitted in Digital video broadcasting satellite form. The transmitting station consists of dish antennas, integrated receiver and decoder, and quart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shing by a job worker will be eligible to the benefit of the Notification...." 9.3 Smart-Cards have been classified as excisable goods under Chapter Heading 8523 of the Central Excise Tariff Act, 1985. Note 6 to Section XVI which covers Chapter 85, has provided that conversion of an article which is incomplete or unfinished, but having the essential character of the complete or finished article, by subjecting it to any process to make it a complete or finished article, then such process shall amount to 'manufacture'. In the case in hand, since the Smart-Cards supplied by the appellants were tested, paired and assembled in the STBs, such process undertaken should be termed as manufacturing activity as per the Section Note 6 (supra). Considering the fact that the STB manufacturer is engaged in manufacturing the excisable goods i.e., STBs, complete in all respects, the jurisdictional authorities, empowered under the statute, have recognized them as a 'manufacturer' and the applicable central excise duty paid by them was accepted as duly discharge of the government dues. Further, the duty paid by them, which was taken as CENVAT credit by the appellants on the basis of invoices accomp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the said inputs are received back within the prescribed time frame. We find that the SCN dated 11.01.2019 does not raise any issues that either the Smart-Cards were not received back after being duly paired with the set-top boxes by the appellants or that the smartcards duly paired with the STBs manufactured by the STB manufacturer, were not received back within the stipulated time frame. As a test check, we have perused the Delivery Challans issued by the appellants as well as the STB manufacturer placed at Pages 395 and 446 respectively in the appeal memorandum. We find that through the Delivery Challan dated 01.01.2017, the appellants had sent 1,54,885 numbers of Smart-Cards for the purpose of testing/pairing and the same numbers of Smart-Cards were returned back from the STB manufacturer vide Delivery Challan dated 01.02.2017. Scanned copy of the Delivery Challans are attached herewith for reference: 11.2 Further, we also find from the accounting records submitted by the appellants that in respect of 1,54,885 numbers of Viewing Cards (which is nothing but STBs complete in all respects), the STB manufacturer had issued the invoices, reflecting payment of appropriate central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2004. This provision requires the job worker to return the job-worked goods to the principal manufacturer of final products within a specified period. If the job-worked goods are not received back in the factory of the manufacturer of final product within such period, the manufacturer of final product shall pay an amount equivalent to the CENVAT credit attributable to the input or capital goods, by debiting the amount in the CENVAT account or otherwise. Rule 4(5)(a) allows CENVAT credit on the input to be taken by the manufacturer of final product before removal of the input to the job worker. It was this right which was exercised by the present appellant and the same is not assailable (in the manner the department chose to do)." 11.4 Rule 2(n) ibid has to be read in conjunction with Rule 4(5)(a)(i) ibid. Job work per se may or may not lead to manufacture. But the usage of the Rule 4(5)(a) ibid is wide enough to cover any activity carried on the input by the job worker and in those cases, the CENVAT credit on inputs need not be reversed under Rule 3(5) ibid. In the case in hand, the operations of testing and pairing of the Smart-Cards sent to the STB manufacturer would fully co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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