2021 (10) TMI 811 - AT - Service Tax

CENVAT Credit - providing of taxable as well as exempt service - exempted service/ job work - non-maintenance of separate record - Rule 6(3) of the Cenvat Credit Rules, 2004 - HELD THAT - N/N. 214/86-CE (NT) though was effective from April 1996 has been amended extensively vide N/N. 49/2002 dated 16.09.2002 so as to make the manufacturer accountable for discharging his obligation in respect of goods under Rule 6 of the Cenvat Credit Rules, 2002. As such when the notification was made service was not treated as an taxable incident in India and the said notification has clearly excluded job workers from the purview of payment of excise duty if ultimate manufacturer was to pay the duty at the time of clearance. Therefore, this amendment of 2005 since has only fixed manufacturer liable to comply with Rule 6 of Cenvat Credit Rules, 2004, to my considered view, job worker cannot be asked to comply the same again on the ground that he is also a part of the manufacturing process. There is no need to further dwell into the issue with reference to S.No. 30 of the Notification No. 22/2012-ST to interpret the nature of work undertaken by the appellant job worker. When such a finding of the adjudication authority is not appealed against by the respondent department, the work undertaken by the appellant was part of the process of manufacturing and not a services rendered by it to the ultimate manufacturer and in due regard to the judicial precedent set by this Tribunal including that of Shree Organo Chemicals Ahmedabad P. Ltd. 2019 (2) TMI 852 - CESTAT AHMEDABAD . Appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of 6% of the value of exempted service for job work under Notification No. 22/2012-ST; Interpretation of Rule 6(3) of the Cenvat Credit Rules, 2004; Applicability of case laws on exempted service; Manufacturing process vs. service provided by job worker; Liability of job worker under Rule 6 of Cenvat Credit Rules, 2004.

Analysis:
The case involved a dispute regarding the demand of an amount equal to 6% of the value of exempted service for job work under Notification No. 22/2012-ST. The appellant, a manufacturer of excisable goods and a job worker, challenged the demand of ?18,35,496/- for availing Cenvat credit against job work activity, which was considered an exempted service. The Commissioner (Appeals) confirmed the demand, leading to the appeal before the Tribunal.

During the appeal, the appellant's Counsel argued that the job work activity did not fall under exempted service as per Notification No. 214/86-CE (NT) and cited various judgments to support this claim. The Counsel emphasized that the job worker's activity should not be treated as an exempted service, as the ultimate manufacturer was discharging the duty liability. The Tribunal considered these arguments along with relevant case laws and rules.

The respondent department contended that the process undertaken by the appellant constituted a service as no new commercial commodity emerged, and thus, the job worker was liable under Rule 6(3) of the Cenvat Credit Rules, 2004. The department relied on specific case laws to support its position that the activity should be considered a service exempted from duty liability.

After hearing both parties and examining the case record, the Tribunal analyzed Notification No. 214/86-CE (NT) and subsequent amendments, highlighting that job workers were excluded from paying excise duty if the ultimate manufacturer was liable. The Tribunal noted that the job worker should not be asked to comply with Rule 6 of Cenvat Credit Rules, 2004, as the manufacturer was already accountable. Additionally, the Tribunal referenced a clear finding by the adjudicating authority for another assessee, supporting the view that the job worker's processes constituted manufacturing, not a service.

Considering the legal precedents and the specific circumstances of the case, the Tribunal allowed the appeal, setting aside the order of the Commissioner (Appeals) and exempting the appellant from the liability to pay the demanded amount, interest, and penalty. The Tribunal's decision was based on the interpretation of the manufacturing process carried out by the job worker and its alignment with the relevant legal provisions and case laws.

Conclusion:
The Tribunal's judgment favored the appellant, emphasizing that the job worker's activities were part of the manufacturing process, not a service rendered to the ultimate manufacturer. By analyzing the applicable rules, notifications, and case laws, the Tribunal determined that the job worker was not liable under Rule 6(3) of the Cenvat Credit Rules, 2004, and overturned the Commissioner (Appeals)'s decision, relieving the appellant from the demanded liability.