2010 (3) TMI 618 - AT - Central Excise

Job work Exemption - The respondent was engaged in the job work of manufacturing paper-covered copper strips for principal manufacturers like M/s. BHEL during the period of dispute. The principal manufacturers supplied copper bars/rods/strips to the respondent and the latter manufactured paper-covered copper strips out of such raw materials and paper procured by themselves. The paper was imported on payment of duties of customs including CVD and, at the time of using it in job work, reversed MODVAT credit of CVD

Summary

Issues:
Interpretation of the scope of "job work" under Notification No. 214/86-C.E. for availing duty exemption.

Analysis:

1. Background: The appeal by the Revenue challenges the Commissioner (Appeals) decision granting the benefit of Notification No. 214/86-C.E. to the respondent, who was engaged in job work manufacturing paper-covered copper strips for principal manufacturers. The Revenue alleged that the work done did not fall within the purview of "job work" as defined in the notification.

2. Contentions: The Revenue argued that the processes undertaken by the respondent exceeded the scope of "job work" as defined under the Explanation to the notification. They relied on previous court decisions to support their interpretation. On the other hand, the respondent's counsel contended that the interpretation by the courts in previous cases was not applicable to the current notification, as it granted full exemption from duty by job workers.

3. Scope of "Job Work": The Tribunal analyzed the definition of "job work" under Notification No. 214/86-C.E. and compared it with the earlier notification. The Explanation to the notification clarified that job work involved processing of raw materials to complete a part or whole of the manufacturing process. It allowed a job worker to manufacture goods before supplying them to the principal manufacturer who provided the raw materials.

4. Material Procurement: The Revenue argued that the respondent used additional materials like paper and varnishes procured by themselves, which they claimed went beyond the scope of "job work." However, the Tribunal noted that the cost of such materials was recovered from the principal manufacturers, making them equivalent to the raw materials supplied by the principal manufacturers.

5. Conclusion: The Tribunal upheld the Commissioner (Appeals) decision in favor of the respondent, stating that the activity qualified as "job work" under the notification. However, they found an error in the Commissioner's decision regarding the time-bar issue. The demand for duty was found to be within the normal period of limitation, and hence, the appeal was dismissed except for the finding on time-bar.

This detailed analysis of the judgment highlights the key legal interpretations and arguments presented before the Appellate Tribunal CESTAT, Mumbai regarding the scope of "job work" under Notification No. 214/86-C.E.