2017 (11) TMI 21 - AT - Central Excise

Benefit of N/N. 214/86 CE dated 25/03/1986 - denial on the ground that the condition of N/N. 214/86 CE requiring the use of goods manufactured on job work basis in the manufacture of final product of raw material supplied, and clearance of final product on payment of duty did not get satisfied - there was an allegation of suppression of the fact and also mis-declaration of the fact - Held that - The Notification Number 214/86-CE provides for exemption to the goods manufactured in the factory as a job work subject to conditions specified therein. One of the conditions specified under notification No.50/2003-CE dated 10.6.2003 is that such goods should be used by the principal manufacturer in the manufacture of goods which are cleared on payment of duty. This condition is not satisfied by BTL inasmuch as they were availing area based exemption. Consequently, appellant will not be eligible for clearance of goods to BTL without payment of duty under N/N. 214/86 - demand upheld. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Interpretation of Notification No.214/86 CE regarding exemption from Central Excise duty for job work.
2. Application of area-based exemption notification No.50/2003-CE.
3. Allegations of suppression and mis-declaration by the appellant.
4. Time-barred demand for Central Excise duty.
5. Compliance with conditions for exemption under Notification No.214/86-CE.

Analysis:

1. The appellant was engaged in job work for M/s Birla Tyres Ltd., manufacturing Butyl Rubber Products under Chapter 40 of the Central Excise Tariff Act, 1985. The dispute arose when the Revenue issued a show cause notice demanding Central Excise duty on goods cleared to Birla Tyres Ltd. under Notification No.214/86 CE. This notification exempts job workers from duty payment subject to specific conditions, including the obligation for the supplier of raw materials to undertake duty liability on the final products.

2. The issue arose because M/s Birla Tyres Ltd. was availing the benefit of area-based exemption under notification No.50/2003-CE, exempting them from paying duty on their final products. As a result, the condition of using the manufactured goods in the final product and paying duty was not met. This led to the initiation of proceedings against the appellant, culminating in the impugned order confirming the duty demand and penalties.

3. The appellant argued that they were under a bona fide belief that no duty was payable, citing the submission of letters and proper documentation. However, the department contended that the appellant suppressed the fact of manufacturing excisable goods and mis-declared their activities, as evidenced by discrepancies in their ER-1 returns. The department maintained that the demand was not time-barred due to these actions.

4. The Commissioner observed that the demand was not time-barred and highlighted the failure of the principal manufacturer to comply with the conditions of the exemption notification. The appellant's contract with M/s Birla Tyres Ltd. for job work did not align with the requirement of using goods in the final product cleared on duty payment, as BTL was availing area-based exemption, rendering the appellant ineligible for duty exemption under Notification No.214/86.

5. Ultimately, the Tribunal upheld the impugned order, dismissing the appeal based on the non-compliance with the conditions for duty exemption under Notification No.214/86-CE. The judgment emphasized the importance of fulfilling the specified conditions for availing exemptions under Central Excise notifications, regardless of the parties' beliefs or submissions.

This detailed analysis covers the key issues addressed in the legal judgment, providing a comprehensive understanding of the Tribunal's decision and the arguments presented by the parties involved.