2019 (2) TMI 1094 - AT - Central Excise

Benefit of N/N. 214/86 dated 25.03.1986 - Job-work - benefit of notification denied on the ground that M/s Divya Pharmacy for whom job work is done by appellant is having the benefit of area based exemption - Held that - N/N. 214/86 provides that exemption to the goods manufactured in the factory as a job work are subject to conditions as specified in the Notification as above i.e. the Notification exempts the job worker from payment of duty subject to fulfilment of the conditions enumerated therein. In the Notification as above, one of the conditions is that such goods should be used by the principal manufacturer in the manufacture of goods which are cleared on payment of duty. In the present case, principal manufacturer i.e. M/s Divya Pharmacy though was getting the plastic containers manufactured on job work basis from the appellant but they were not clearing their final product with those plastic containers on payment of duty as they were availing the area based exemption as per N/N. 50/2003-CE dated 10.06.2003 - Once, there was no duty on the final goods cleared no question of any exemption available qua the goods manufactured in factory as a job work arises. Therefore, appellant is also not qualifying the remaining two conditions of the said notification. We are of the opinion that benefit of N/N. 214/86 is not available to the appellant. Intent to evade exists or not? - Held that - No bonafide can be attributed to the appellant submission that he was not aware of the condition of the said Notification that the goods are to be cleared after payment of duty to availing the benefit. In the given circumstances, the only possibility for the non payment is the intent to evade the duty. There is no other cogent evidence to support the bonafide. Appeal dismissed - decided against appellant.

Summary

Issues:
- Whether the appellant is liable to pay central excise duty for manufacturing plastic containers on job work basis.
- Whether the benefit of Notification No. 214/86-CE is available to the appellant.
- Whether the penalty imposed on the appellant is justified.

Analysis:

Issue 1: Liability for Central Excise Duty
The Department alleged that the appellant, engaged in manufacturing plastic containers on job work basis for a company availing area-based exemption, evaded duty. The Department issued a show cause notice proposing duty recovery. The Commissioner confirmed the demand, leading to the appeal. The appellant argued they were only job workers, did not take cenvat credit, and charged job work expenses properly. They claimed no fraud or intent to evade duty. The appellant contended the penalty was unjustified and the notice was time-barred. The Department argued that the area-based exemption did not apply to the appellant. The Tribunal observed that the appellant's actions indicated an intent to evade duty, as they were aware of the exemption status of the principal manufacturer. The Tribunal upheld the duty liability and penalty, dismissing the appeal.

Issue 2: Benefit of Notification No. 214/86-CE
The Tribunal analyzed Notification No. 214/86-CE, which exempts job workers from duty under specific conditions. One condition is that the goods must be used by the principal manufacturer for products cleared on duty payment. In this case, the principal manufacturer enjoyed area-based exemption and did not clear final products with duty payment. As a result, the appellant did not meet the conditions of the notification. The Tribunal concluded that the benefit of the notification was not available to the appellant.

Issue 3: Justification of Penalty
Regarding the penalty, the appellant claimed bonafide intent and lack of awareness about the exemption conditions. However, the Tribunal noted that the appellant was aware of the principal manufacturer's exemption status. The Tribunal found no evidence supporting the appellant's bonafide claim and upheld the penalty. The Tribunal also determined that the show cause notice was not time-barred. Consequently, the Tribunal affirmed the penalty and dismissed the appeal.

In conclusion, the Tribunal upheld the duty liability, denied the benefit of Notification No. 214/86-CE to the appellant, and justified the penalty imposition due to the apparent intent to evade duty. The Tribunal's decision was based on the specific conditions outlined in the notification and the appellant's knowledge of the principal manufacturer's exemption status.