2010 (9) TMI 415 - AT - Central Excise

Job work Demand of duty and penalty - appellants inputs in the job work and cleared such final products without payment of duty to the persons who supplied the material - goods cleared by the appellants under 214/86 cannot be treated as exempted goods and, therefore, the question of applying Rule 6 of the Cenvat Credit Rules does not arise - no basis for demanding duty by disallowing credit attributable to materials used by the job worker Notification No. 214/86 dated 25.3.1986 is a special kind of notification. It does not exempt the goods manufactured by the job worker unconditionally. It merely postpones the time of payment of duty and also shifts the duty liability from the job worker, (who is actually a manufacturer) to the principal manufacturer (who supplied the raw material). Therefore, to treat the goods which have been cleared by job worker working under 214/86 as exempted goods is not justified.

Summary

Issues:
- Appeal against Commissioner (Appeals) order dated 30-9-2008.
- Availing Cenvat credit on inputs for manufacturing final products.
- Undertaking job work basis manufacturing of galvanized steel pipes.
- Demand of duty, interest, and penalty by original authority.
- Interpretation of Notification No. 214/86 dated 25-3-1986.
- Dispute over credit availed on inputs used in job work.
- Application of Rule 6 of Cenvat Credit Rules.
- Exemption status of goods cleared by job worker under Notification 214/86.
- Contradictory findings of authorities below regarding Notification 214/86 conditions.
- Decision on demanding duty and disallowing credit for materials used by job worker.

Analysis:
The appeal before the Appellate Tribunal CESTAT, NEW DELHI involved a dispute arising from the appellant's availing of Cenvat credit on inputs for manufacturing final products, particularly in the context of undertaking job work manufacturing of galvanized steel pipes. The original authority had demanded duty, interest, and penalty, citing the appellant's clearance of final products without duty payment. The Commissioner (Appeals) upheld this decision, leading to the appeal. The crux of the matter lay in the interpretation of Notification No. 214/86 dated 25-3-1986, which was crucial in determining the duty liability and credit availed on inputs used in job work.

Upon hearing both sides, the Tribunal considered the arguments put forth. It was noted that Notification 214/86 did not unconditionally exempt goods manufactured by job workers but rather postponed duty payment and shifted the liability to the principal manufacturer providing the raw material. The Tribunal emphasized that goods cleared by job workers under this notification could not be treated as exempted goods, impacting the application of Rule 6 of the Cenvat Credit Rules. The authorities' findings regarding the appellant's compliance with Notification 214/86 conditions were deemed contradictory, as they had not demanded duty on the entire value of final products, including inputs supplied by the principal manufacturer.

Ultimately, the Tribunal set aside the orders of the authorities below, ruling in favor of the appellant. It was concluded that the goods cleared under Notification 214/86 could not be considered exempted, thereby negating the basis for demanding duty by disallowing credit attributed to materials used by the job worker. The appeal was allowed with consequential relief as per law, bringing resolution to the dispute over duty liability and credit availed in the job work manufacturing process.