2018 (2) TMI 454 - AT - Central Excise

SSI exemption - job-work - valuation - Held that - we do not find any reason why, when the goods have been manufactured on job work basis and returned to the customers and job charges have been collected as indicated in the show cause notice, how the value of these clearances can be foisted on to Hitech for the purposes of determining the value of clearances for SSI exemption - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the value of goods manufactured and cleared on job work basis should be added to the value of goods manufactured and cleared on sale basis for determining SSI exemption eligibility.
2. Whether the imposition of differential duty, interest, and penalties on the appellant is justified.

Analysis:
1. The case involves M/s. Hitech Flexi Pack Pvt. Ltd., a manufacturer of packaging materials and pouches availing SSI exemption. The Department alleged that the value of goods cleared on job work basis should be added to the value of goods cleared on sale basis, exceeding the SSI exemption limits for 2001-02 to 2005-06. A show cause notice was issued, demanding differential duty and imposing penalties on the appellant and its Managing Director.

2. During the hearing, the appellant's counsel argued that the clearance value in question pertained only to job work basis, emphasizing that the raw materials were supplied by customers. The duty liability was related to clearance on job work basis for pouches, as the appellant was engaged in lamination and printing, not pouch manufacturing. The appellant subcontracted pouch manufacturing to another job worker, and job charges were sometimes paid directly by customers to the second job worker.

3. The Department, represented by the ld. AR, supported the impugned order reducing the duty liability and imposing penalties. However, the Tribunal, after hearing both sides and examining the records, found that the appellant was only involved in job work for the goods in question. It was noted that the raw materials were supplied by customers, and the appellant subcontracted pouch manufacturing, which was permissible. The Tribunal emphasized that the intention of SSI exemption provisions was not to include job work clearances in determining exemption eligibility.

4. Consequently, the Tribunal held that the impugned order was not sustainable and set it aside. Both appeals were allowed, providing consequential relief as per the law. The judgment highlighted the distinction between goods manufactured on job work basis and those cleared for sale, ensuring that the value of job work clearances should not impact SSI exemption eligibility.

5. The decision clarified the application of SSI exemption provisions concerning job work and upheld the appellant's position regarding the clearance value for determining duty liability and penalties. The judgment emphasized the importance of considering the specific circumstances of job work arrangements in assessing duty obligations and exemption eligibility under the relevant provisions.