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2019 (11) TMI 829 - AT - Central ExciseValuation - job-work - manufacture of Plastic jerry can and pet bottles - case of the department is that the principal manufacturer are using the job worker manufactured goods in the manufacture of exempted goods, therefore, the job worker being a manufacturer are required to pay excise duty - extended period of limitation - HELD THAT - In the case of THERMAX BABCOCK AND WILCOX LTD., THERMAX LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-I 2017 (12) TMI 266 - CESTAT MUMBAI , Division Bench of Mumbai Tribunal referred the matter to Larger Bench and then only the Larger Bench has held that in case of job worker when the procedure under Notification No. 214/86- CE is not followed and the principal manufacturer is not discharging the excise duty on their final product, job worker is required to pay excise duty. Therefore the appellants have correctly entertained the bonafide belief that on the basis of various judgments that excise duty was payable by the principal supplier of the raw material. Extended period of limitation - HELD THAT - It is settled law in various judgments in the case of MARSHA PHARMA PVT. LTD. VERSUS COMMISSIONER OF C. EX., VADODARA 2009 (6) TMI 818 - CESTAT, AHMEDABAD which was upheld by Hon ble Gujarat High Court in COMMISSIONER - CENTRAL EXCISE CUSTOMS VADODARA - I VERSUS MARSHA PHARMA PVT LTD 2010 (9) TMI 1125 - GUJARAT HIGH COURT and also in case of COMMISSIONER OF C. EX., CUS. ST., VAPI VERSUS CHARAK PHARMA P. LTD. 2012 (11) TMI 475 - GUJARAT HIGH COURT that the demand for the extended period of limitation was not permissible when the issue was referred to Larger Bench of Tribunal. The appeals related to the demand of extended period are allowed and in respect of demand for the normal period it is remanded to the adjudicating authority for re-quantification of the demand It is made clear that since we have held that there was no malafide on the part of the appellants, no penalty is imposable on all the appellants in respect of any duty liability arise after re-quantification. Appeal allowed by way of remand.
Issues Involved:
1. Liability of excise duty on job workers. 2. Applicability of extended period for demand. 3. Entitlement to Cenvat credit. 4. Deduction of excise duty on inputs for valuation of job work goods. 5. Imposition of penalties. Detailed Analysis: 1. Liability of Excise Duty on Job Workers: The appellants, engaged in manufacturing plastic containers on a job work basis, did not pay excise duty on the goods cleared to their principal manufacturers. The department contended that since the principal manufacturers used these goods to produce exempted goods, the job workers were required to pay excise duty. The appellants argued that, based on various judgments, they believed the principal suppliers were liable for the duty. The Tribunal acknowledged that prior judgments, such as Aggarwal Rolling Mills and Sree Rayalaseema Dutch Kassenbouw Ltd, supported the appellants' belief that the duty was the responsibility of the principal supplier. 2. Applicability of Extended Period for Demand: The Tribunal found that the issue of duty liability on job workers was subject to legal dispute and conflicting judgments. The Larger Bench in Thermax Babcock Wilcox Ltd clarified that job workers must pay duty if the principal does not follow Notification No. 214/86-CE. Given the appellants' bona fide belief, supported by several judgments, the demand for the extended period was deemed unsustainable. The Tribunal cited Marsha Pharma Pvt. Ltd, upheld by the Gujarat High Court, which held that extended period demands are not permissible when the issue is under legal dispute and referred to a Larger Bench. 3. Entitlement to Cenvat Credit: The appellants claimed entitlement to Cenvat credit for raw materials supplied directly from the supplier to the job worker. The Tribunal agreed, referencing judgments such as Kirloskar Brothers Ltd and Apex Steel (P) Ltd, which supported the appellants' entitlement to Cenvat credit. The adjudicating authority was directed to verify the duty-paying documents to confirm this entitlement. 4. Deduction of Excise Duty on Inputs for Valuation of Job Work Goods: The appellants argued for the deduction of excise duty on inputs when determining the value of goods produced on a job work basis. The Tribunal upheld this, citing the Dai Ichi Karkaria Ltd judgment, confirmed by the Supreme Court, which established that excise duty on inputs must be deducted for valuation purposes. 5. Imposition of Penalties: Given the Tribunal's finding that the appellants had a bona fide belief based on multiple judgments, no malafide intention was attributed to them. Consequently, no penalties were imposed. The Tribunal cited Dharti Automobiles and Rajarshi Auto Deals Pvt. Ltd, which supported the non-imposition of penalties when the issue was not free from doubt and referred to a Larger Bench. Conclusion: The appeals related to the demand for the extended period were allowed, and the demand for the normal period was remanded to the adjudicating authority for re-quantification. The appellants were entitled to Cenvat credit and deductions as per established legal precedents. No penalties were imposed due to the lack of malafide intention. The judgment was pronounced in the open court on 06.09.2019.
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