2018 (1) TMI 1254 - AT - Central Excise

Valuation - demand of duty on the ground that the raw materials were not supplied under job work challans, either under Notification No.214/86 or under Rule 4(5) of Cenvat Credit Rules, 2002 - suppression of facts - Held that - It is not the allegation or case of the department that the job-worked goods have been summarily removed from the job worker without discharge of duty liability thereon. On the other hand, in the show-cause notice and even in the orders of the lower authorities, it is conceded that the job-worked goods have been returned to the raw material supplier. Obviously, the onus of discharge of duty liability will be on the raw material supplier, on which aspect the show-cause notice is silent - the demand of duty liability from the job worker would be an overkill - appeal allowed - decided in favor of appellant.

Summary

Issues:
Duty liability on job-worked goods, interpretation of Rule 4(5) of Cenvat Credit Rules, compliance with Notification No. 214/86, imposition of penalties.

Analysis:
The case involved a dispute regarding duty liability on job-worked goods by M/s. Strategic Engineering P. Ltd., manufacturers of Fibre Reinforced Pipes. The department alleged duty liability on the appellants for job-worked goods supplied to M/s. Aban Constructions (Pvt.) Ltd. The original authority confirmed the duty liability and imposed penalties, which was upheld by the Commissioner (Appeals). The appellants challenged this decision before the forum.

During the hearing, the appellants argued that Rule 5 of the Cenvat Credit Rules is applicable to the manufacturer/supplier of raw material, not the job worker. They provided evidence that duty had been paid at the supplier's end. The department contended that Notification No. 214/86 requirements must be followed for sending goods to job workers, including giving an undertaking to the Central Excise Commissioner.

Upon review, it was found that the main grounds for proposing duty demand were non-compliance with job work challans and willful suppression of job-work production. The Notification No. 214/86 and Rule 4(5) of the Cenvat Credit Rules are beneficial provisions for manufacturers to send raw materials for processing. Rule 4(5) specifically enables manufacturers to send inputs to job workers for processing and return within 180 days.

The Tribunal observed that the onus of duty liability lies with the raw material supplier, not the job worker. As the job-worked goods were returned to the supplier, the demand of duty liability from the job worker was deemed excessive. Therefore, the impugned order confirming duty liability and penalties was set aside, and the appeal was allowed with consequential reliefs as per law.