2018 (5) TMI 1345 - AT - Central Excise

Benefit of N/N. 214/86-CE - job-work - denial of benefit on the ground that appellant is manufacturer of parts of tractors and the activity undertaken by the appellant amounts to manufacture and the final product (tractor) is exempt from payment of duty - Held that - if the principal manufacturer has filed written undertaking, the proceedings are not required to be initiated against the appellant as the said undertaking has been accepted by the Revenue and the appellant is entitled to clear the goods without payment of duty in terms of N/N. 214/86-CE - demand not sustainable. Extended period of limitation - Held that - as the activity undertaken by the appellant were known to the Revenue and option was claimed in terms of N/N. 214/86-CE on the strength of undertaking filed by the principal manufacturer, in that circumstance, the extended period limitation is not invokable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against duty demand under Notification No.214/86-CE; Appellant engaged in job work manufacturing parts of tractors; Show cause notices invoking extended period of limitation; Benefit of Notification N0.214/86-CE disputed.

Analysis:
The appellants challenged an order demanding duty by denying the benefit of Notification No.214/86-CE due to their activity of processing goods on a job work basis for a principal manufacturer. The jurisdictional authority observed the appellant's activity as manufacturing parts of tractors, making the final product (tractor) duty exempt. Show cause notices were issued for duty payment, penalties, and interest for a specified period, invoking the extended limitation period. The appellants contended that since the principal manufacturer filed an undertaking as per Notification No.214/86-CE, they were not liable to pay duty. They relied on a tribunal decision supporting their claim.

The respondent argued that the goods manufactured by the principal manufacturer were duty exempt, suggesting a mistake in the undertaking filed. The burden to pay duty on goods manufactured and cleared was placed on the appellant. The Tribunal noted that the principal manufacturer's undertaking, accepted by the Revenue, entitled the appellant to clear goods without duty payment under Notification No.214/86-CE. The demand against the appellant was deemed unsustainable based on the tribunal's previous decision.

Regarding the show cause notices invoking the extended limitation period, it was concluded that since the appellant's activity was known to the Revenue and the option under Notification No.214/86-CE was claimed based on the principal manufacturer's undertaking, the extended limitation period was not applicable. Consequently, the impugned orders were set aside, and the appeals were allowed with any consequential relief.

This judgment clarifies the applicability of Notification No.214/86-CE in cases of job work manufacturing and the significance of accepted undertakings by the Revenue. It emphasizes the burden of proof regarding duty payment and the limitations on invoking extended periods for duty demands.