2007 (3) TMI 460 - AT - Central Excise

Summary

Issues:
- Benefit of Notification No. 214/86-C.E. denied to job workers for manufacturing "Air-heater block assembly"
- Interpretation of the definition of "job work" under the Explanation to Notification No. 214/86
- Use of materials other than those supplied by the principal manufacturer in job work
- Whether materials independently sourced by job worker affect the claim of exemption under Notification No. 214/86

Analysis:

The appeals before the Appellate Tribunal CESTAT, Chennai were against the denial of the benefit of Notification No. 214/86-C.E. to job workers for manufacturing "Air-heater block assembly." The lower authorities held that materials not supplied by the principal manufacturer were used by the job worker, leading to the denial of the Notification's benefit. The Tribunal considered the Tribunal's decision in Desh Rolling Mills, which stated that the benefit of the Notification could only be claimed if raw materials were supplied by the principal manufacturer. The Tribunal noted that the job worker used certain materials like grinding wheels, gases, bolts, and nuts from their own source in the manufacturing process.

The key issue revolved around the interpretation of the definition of "job work" under the Explanation to Notification No. 214/86. The job worker argued that the definition allowed the use of materials other than those supplied by the principal manufacturer to complete the job work. The job worker presented evidence that M/s. BHEL had obtained permission to supply raw materials and receive job-worked products under the Notification. The job worker contended that the materials they used did not alter the essential character of the final product.

The Tribunal analyzed whether the materials independently sourced by the job worker affected their claim of exemption under Notification No. 214/86. It was established that M/s. BHEL supplied the necessary raw materials for manufacturing the product, while the materials sourced by the job worker were consumables and did not impart essential character to the final product. The Tribunal concluded that the job worker was not precluded from using materials other than raw materials supplied by the principal manufacturer. As the raw materials required for the product were provided by the principal manufacturer, the independently sourced materials did not qualify as "raw materials" under the Notification. Consequently, the Tribunal set aside the impugned orders and allowed the appeals, providing relief to the appellants.