2014 (9) TMI 717 - HC - Central Excise

Reversal of CENVAT Credit - Whether the removal of moulds and dies under Rule 57S(8) of the Rules without reversal of credit would be a violation as alleged by the Department - Held that - Moulds and dies were supplied by the assessee to the job worker and the job worker used their own raw materials along with the moulds and dies supplied by the assessee in the manufacturing of parts according to the design and specification of the assessee. After the parts are so manufactured, central excise duty is paid on the value of raw material, the amortised value of moulds and dies and the job charges and thereafter, the goods are cleared to the assessee for use in the manufacture of washing machines. It is another matter that the assessee claims credit on the duty paid component of the manufactured parts supplied by the job worker. Ultimately, on the clearance of washing machine, duty is paid including all these values. Removal of moulds and dies without payment of duty is in relation to only moulds and dies and not with respect of any other capital goods. It does not impose any condition that the raw materials also should be supplied by the assessee along with the moulds and dies. So long as the permission is granted by the Commissioner for removal of moulds and dies without payment of duty to the job worker, the question of deeming it as an improper clearance does not arise. Decision in the case of Prestige Engineering (India) Ltd. vs Collector Of Central Excise, Meerut reported in 1994 (7) TMI 157 - CEGAT, NEW DELHI as had been already extracted supra, the emphasis laid by the Supreme Court is that the Explanation appended to notification on the expression job worker is in relation to the said notification and not otherwise. It, therefore, means, that the term job worker in respect of one notification and the term job worker in relation to Rule 57S(8) should be understood in the context of the provisions of the Modvat Rules. The provisions of Rule 57S(8) clearly mandates that consequent on the permission of the competent authority, moulds and dies should be removed, without payment of duty, to job worker . If such condition has been complied with by the assessee, the Department cannot import any other meaning to disentitle the assessee of the benefit that flow out of Rule 57S(8) of the Rules. When the Department having accepted the decision in the case of Monica Electronics vs Cce reported in 2000 (4) TMI 84 - CEGAT, NEW DELHI without demur, in the present case, on the same set facts, they are not entitled to agitate the same issue with regard to the assessee s claim of removal of moulds and dies without payment of duty following the procedure prescribed under Rule 57S(8) of the Rules. as the issue on double Modvat benefit is concerned, the Revenue has not raised the issue before the first Appellate Authority or before the Tribunal - Decided against Revenue.

Issues Involved:
1. Interpretation of sub-rule 8 of Rule 57S of Central Excise Rules, 1944.
2. Applicability of the Supreme Court ruling in Prestige Engineering (India) Ltd. vs. Commissioner of Central Excise.
3. Legality of allowing double Modvat benefits to the assessee.

Detailed Analysis:

Issue 1: Interpretation of sub-rule 8 of Rule 57S of Central Excise Rules, 1944
The core issue was whether the Tribunal's finding that a job worker need not be supplied with raw materials by the principal manufacturer for sub-rule 8 of Rule 57S to apply was correct. The Tribunal had held that it was not necessary for the raw materials to be supplied by the principal manufacturer for the job worker to be considered as such under Rule 57S(8). The Tribunal relied on the decision in Monica Electronics vs. CCE, which emphasized that the non-obstante clause in sub-rule 8 allowed the removal of moulds and dies without payment of duty to a job worker, irrespective of who supplied the raw materials. The Tribunal's interpretation was upheld by the High Court, which noted that the rule did not impose any condition regarding the supply of raw materials.

Issue 2: Applicability of the Supreme Court ruling in Prestige Engineering (India) Ltd. vs. Commissioner of Central Excise
The Supreme Court in Prestige Engineering had ruled that for a process to be considered job work, the raw materials must be supplied by the customer. The High Court distinguished the present case from Prestige Engineering, noting that the latter dealt with an exemption notification that explicitly defined job work in terms of materials supplied by the customer. In contrast, Rule 57S(8) of the Central Excise Rules did not contain such a requirement. The High Court concluded that the Tribunal was correct in not applying the Prestige Engineering ruling to the present case, as the context and the specific provisions of Rule 57S(8) were different.

Issue 3: Legality of allowing double Modvat benefits to the assessee
The Revenue argued that allowing the assessee to avail credit on moulds and dies and also on the parts manufactured using these moulds and dies amounted to double Modvat benefits, which violated CENVAT/MODVAT provisions. However, the High Court noted that this issue was not raised before the first Appellate Authority or the Tribunal. Consequently, the High Court found no justification for the Revenue to raise this issue for the first time before it. The High Court dismissed the Revenue's plea on this ground.

Conclusion:
The High Court upheld the Tribunal's decision, confirming that:
1. The Tribunal correctly interpreted sub-rule 8 of Rule 57S, allowing the removal of moulds and dies without payment of duty to job workers, regardless of who supplied the raw materials.
2. The Supreme Court ruling in Prestige Engineering was not applicable to the present case due to different contexts and specific provisions.
3. The issue of double Modvat benefits was not properly raised by the Revenue at earlier stages and thus could not be considered afresh by the High Court.

The High Court dismissed all the Civil Miscellaneous Appeals filed by the Revenue, confirming the Tribunal's order and granting the benefit to the assessee.

← Previous Next →