2021 (10) TMI 701 - AT - Central Excise

CENVAT Credit - Job-work - exempted service - credit claimed on taxable as well as exempt goods - non-maintenance of separate records - demand of an amount equal to 6% of the value of exempted service - Rule 6(3) of the Cenvat Credit Rules, 2004 - HELD THAT - Notification No. 214/86-CE (NT) though was effective from April 1996 has been amended extensively vide Notification No. 49/2002 dated 16.09.2002 so as to make the manufacturer accountable for discharging his obligation in respect of goods under Rule 6 of the Cenvat Credit Rules, 2002. As such when the notification was made service was not treated as an taxable incident in India and the said notification has clearly excluded job workers from the purview of payment of excise duty if ultimate manufacturer was to pay the duty at the time of clearance. Therefore, this amendment of 2005 since has only fixed manufacturer liable to comply with Rule 6 of Cenvat Credit Rules, 2004, job worker cannot be asked to comply the same again on the ground that he is also a part of the manufacturing process. There being a clear finding of the adjudicating authority that the processes undertaken by the job worker were incidental and ancillary to manufacturing or production and hence, amounts to manufacture or production of goods that is specifically excluded from the purview of taxable service, which is also found reflected in the written note filed on behalf of the appellant, there is no need to further dwell into the issue with reference to S.No. 30 of the Notification No. 22/2012-ST to interpret the nature of work undertaken by the appellant job worker. When such a finding of the adjudication authority is not appealed against by the respondent department, the work undertaken by the appellant was part of the process of manufacturing and not a services rendered by it to the ultimate manufacturer. The impugned order is hereby set aside exempting the appellant from the liability to pay the amount or interest and penalty confirmed in the adjudication process - appeal allowed.

Summary

Issues:
Demand of 6% of the value of exempted service under Notification No. 22/2012-ST for job work activity, applicability of Rule 6(3) of the Cenvat Credit Rules, 2004, legality of order confirmed by Commissioner (Appeals), interpretation of job work as a service, reliance on case laws, manufacturing process by job worker, liability of job worker for duty payment, application of Notification No. 214/86-CE (NT), compliance with Rule 6 of Cenvat Credit Rules, 2004, benefits of Cenvat credit for job workers, nature of work undertaken by job worker.

Analysis:
The case involved a dispute regarding the demand of 6% of the value of exempted service under Notification No. 22/2012-ST for job work activity by the appellant, a manufacturer and job worker. The appellant challenged the order passed by the Commissioner (Appeals) that confirmed the demand under Rule 6(3) of the Cenvat Credit Rules, 2004. The appellant contended that the job work activity should not be considered as an exempted service as per the provisions of Notification No. 214/86-CE (NT) and relied on various case laws to support their argument.

During the proceedings, the appellant's Counsel argued that the judgments of the Tribunal in similar cases established that job work activity under Notification No. 214/86-CE (NT) should not be treated as an exempted service, contrary to the Commissioner (Appeals)'s decision. The Counsel highlighted the distinction between different notifications and emphasized that the appellant's case fell under a notification where the duty liability was with the ultimate manufacturer, not the job worker.

On the other hand, the respondent department contended that the process undertaken by the appellant should be considered as a service offered to the manufacturer, exempted from duty liability. The respondent relied on the precedent set by case laws to support their argument that the appellant's activity did not result in the creation of a different commercial commodity, hence should be treated as a service.

After considering the arguments and case laws presented by both parties, the Tribunal analyzed the relevant rules, notifications, and case laws. The Tribunal observed that the amendment in Notification No. 214/86-CE (NT) shifted the duty liability to the manufacturer and excluded job workers from duty payment obligations. Additionally, the Tribunal noted that Rule 6 of the Cenvat Credit Rules, 2004 provided benefits of Cenvat credit to job workers for inputs used in manufacturing goods without duty payment.

Based on the findings and legal analysis, the Tribunal concluded that the job work undertaken by the appellant was part of the manufacturing process and not a service rendered to the manufacturer. The Tribunal referred to previous judgments, including the one in Shree Organo Chemicals Ahmedabad P. Ltd., to support its decision. Consequently, the Tribunal allowed the appeal and set aside the order passed by the Commissioner (Appeals), exempting the appellant from the liability to pay the demanded amount, interest, and penalty.