2015 (11) TMI 1036 - AT - Central Excise

Job Work - There was no evidence to show that appellants or the principal supplier claimed the benefit of exemption under Notification No.214/86. - No declaration filed by the principal supplier with jurisdictional Central Excise authority under whose jurisdiction the job worker was located. - Revenue contended that Rule 4 (5) (a) of CCR is not applicable on the ground that principal supplier has not availed credit - Extended period of limitation - Held that - appellants have informed the concerned jurisdictional authorities at every stage about their carrying out the job work and receipt of MS scrap and conversion into billets and ingots as per conversion agreements to the principal suppliers. Therefore, we are of the considered opinion that appellant has not suppressed any facts particularly to the fact that the said letters were duly received by the jurisdictional authorities and there was no objection raised by the authorities and no verification was done treating that it is only an intimation. - demand is hit by limitation. - Decided in favor of assessee. Decision on merit - Appellant have received MS scrap as per conversion agreements entered into with the principal manufacturer/supplier and there is no dispute on the fact that appellants are also original manufacturers of MS ingots and billets on their own account and discharging central excise duty on the final products. It is an admitted fact that appellant received raw materials on job work and after conversion cleared MS ingots/billets to their principal supplier M/s.Kanishk Steel Industries. Vyapar, Salem, Ispat Radice (India) Ltd. in the respective central excise jurisdiction. On perusal of the challans and invoices, we find that the invoice bears the clear endorsement sent for conversion under Rule 4 (5) (a). No SCN has been issued or any investigation carried out with the principal suppliers of raw materials as to whether the duty has been discharged on the final product cleared by the principal manufacturer as per the job work notification. Further, it is pertinent to see that both the appellant and the principal suppliers are duly registered with the Central Excise and following Central Excise procedures. The principal manufacturers duly declared/intimated to the department that raw materials were being sent for conversion under Rule 4 (5) (a) as evident from the correspondences, invoice and DC and other documents. Being a central excise manufacturer the principal manufacturer is entitled to send raw material as such or for further processing under Rule 4 (5) (a). The rule includes the term removal of raw materials for further processing and the department is not disputing that the goods are not returned by the appellant after conversion. No input credit has been availed by the job worker. Revenue contended that Rule 4 (5) (a) of CCR is not applicable on the ground that principal supplier has not availed credit. In the present case, the scrap was directly sent from the port of import to the job worker and the principal supplier has availed credit immediately on receipt of MS ingots and billets from the job worker. There is no restriction on the manufacturer to send raw material directly from the place of import to the job work premises. Therefore, we hold that there is no dispute on the receipt of scrap and clearance of MS ingots/billets to the principal supplier, the question of demanding duty on the job work does not arise. In view of the foregoing discussions, we are of the considered view that demand of excise duty on the job worker i.e. appellant is not sustainable both on limitation and on merits. - principal manufacturer also filed declaration to ACCE Karaikal vide letter dt. 20.11.2007 and clearly indicated the jurisdictional ACCE on job work under Rule 4 (5) (a). Since the appeal of the main appellant is allowed by setting aside demand and penalty, the penalty imposed on the co-noticees are also liable to be set aside - Decided in favour of assessee.

Issues Involved:
1. Demand of excise duty on goods manufactured under job work Notification No.214/86-CE.
2. Compliance with the conditions of Notification No.214/86-CE, specifically filing declarations with jurisdictional authorities.
3. Applicability of Rule 4(5)(a) of the Cenvat Credit Rules (CCR).
4. Limitation period for issuing show cause notices.
5. Imposition of penalties under Section 11AC of the Central Excise Act and Rule 25 of Central Excise Rules, 2002.
6. Allegation of suppression of facts and misdeclaration.

Detailed Analysis:

1. Demand of Excise Duty on Goods Manufactured Under Job Work Notification No.214/86-CE:
The core issue revolves around the demand for excise duty on MS billets and ingots manufactured by the appellants from MS scrap received from principal suppliers. The appellants argued that as job workers, they were not liable to pay excise duty; instead, it should be the responsibility of the principal manufacturers. The adjudicating authority, however, demanded duty from the appellants, asserting non-compliance with Notification No.214/86-CE.

2. Compliance with Notification No.214/86-CE:
The adjudicating authority's demand was based on the appellants' alleged failure to file the necessary declarations with the jurisdictional Central Excise authorities. The appellants contended that they had informed the authorities through various letters and had complied with the notification by sending raw materials for conversion and returning the finished goods to the principal suppliers. The Tribunal found that the principal manufacturers had indeed filed declarations with their respective jurisdictional authorities, and the appellants had informed their jurisdictional authorities about the job work.

3. Applicability of Rule 4(5)(a) of CCR:
The appellants argued that their actions were in compliance with Rule 4(5)(a) of CCR, which allows the removal of raw materials for further processing. The Tribunal noted that the invoices clearly mentioned that the goods were sent for conversion under Rule 4(5)(a) and that the principal manufacturers had duly accounted for the received billets and ingots in their records. The Tribunal concluded that the appellants had followed the procedures correctly under Rule 4(5)(a).

4. Limitation Period for Issuing Show Cause Notices:
The appellants argued that the demand was time-barred, as the show cause notice was issued beyond the normal period of limitation. They contended that there was no suppression of facts since they had filed monthly ER-1 returns and had informed the authorities about the job work. The Tribunal agreed with the appellants, finding that the department was aware of the job work through various letters and audits, and thus, the extended period of limitation could not be invoked.

5. Imposition of Penalties:
The adjudicating authority had imposed penalties on the appellants and the co-noticees under Section 11AC and Rule 25 of the Central Excise Rules, 2002. The appellants argued that there was no suppression of facts or intent to evade duty, and thus, penalties were not warranted. The Tribunal, agreeing with the appellants, set aside the penalties, noting that the appellants had complied with the necessary procedures and had informed the authorities about the job work.

6. Allegation of Suppression of Facts and Misdeclaration:
The department alleged that the appellants had suppressed facts and misdeclared in their ER-1 returns. The Tribunal found that the appellants had informed the authorities about the job work and had filed necessary declarations and returns. The Tribunal held that mere omission to give correct information is not suppression of facts unless it was deliberate to evade duty, and in this case, there was no such intent.

Conclusion:
The Tribunal concluded that the demand for excise duty on the job worker (appellants) was not sustainable both on limitation and on merits. The appellants had complied with the necessary procedures under Notification No.214/86-CE and Rule 4(5)(a) of CCR. The penalties imposed on the appellants and co-noticees were also set aside. All the appeals were allowed, and the impugned order was set aside.

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