2017 (9) TMI 218 - AT - Central Excise

Valuation - job-work - Rule 4(5)(a) of the CCR - liability of principal manufacturer or job-worker - Held that - the respondent were working in terms of the provisions of Rule 4(5)(a) of the Cenvat Credit Rules which allows the job worker to clear the final product to the principal manufacturer, without payment of duty, subject to following the requisite procedure. In such a situation it is the liability of principal manufacture to pay the duty - There is no allegation that the principal manufacturers have not discharged the duty burden - job-worker not liable to pay - appeal dismissed - decided against Revenue.

Summary

Issues:
Interpretation of Rule 4(5)(a) of the Cenvat Credit Rules regarding duty liability on job worked goods.
Applicability of the judgment in the case of Ujjagar Prints to the current scenario.

Analysis:
The judgment involved an appeal by the Revenue against the order passed by the Commissioner (Appeals) regarding the duty liability of a respondent engaged in the manufacture of motor vehicles and parts under Chapter 87 & 95 of the Central Excise Tariff Act, 1985. The respondent was also involved in job work for principal manufacturers, paying duty only on the value of their inputs. The Revenue contended that duty should be discharged on the full value of goods, including raw materials sent by the principal manufacturer.

The appellate authority, however, allowed the appeal by emphasizing the provisions of Rule 4(5)(a) of the Cenvat Credit Rules. This rule does not impose duty liability on the job worker for job worked goods. It places the duty payment obligation on the principal manufacturer, who must pay duty if the goods are not received back within 180 days. The judgment of the Hon'ble Supreme Court in the case of Ujjagar Prints, relied upon by the adjudicating authority, was distinguished as the present case involved the principal manufacturer paying duty, absolving the job worker from additional duty burden.

The Tribunal further highlighted the decision in the case of Menon & Menon Ltd., which was challenged by the Revenue before the Supreme Court and subsequently rejected. This case reiterated that if the job worker did not take modvat credit on inputs, they were not liable to pay duty on those inputs. The Tribunal concluded that the issue was settled, and no error was found in the Commissioner (Appeals) order. The appeal by the Revenue was therefore rejected, affirming the duty liability interpretation under Rule 4(5)(a) of the Cenvat Credit Rules.

In summary, the judgment clarified the duty liability under Rule 4(5)(a) of the Cenvat Credit Rules, emphasizing the obligation of the principal manufacturer to pay duty on job worked goods and distinguishing the applicability of the Ujjagar Prints case. The decision in Menon & Menon Ltd. further supported the interpretation that duty payment responsibility lies with the principal manufacturer, not the job worker, in such scenarios.