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2022 (5) TMI 564 - AT - Central ExciseLevy of Central Excise duty - intermediate goods used in the manufacture of exempt final goods - whether Central Excise Duty is payable on the intermediate products viz. Brass Casted Road manufactured at their unit own by appellant and Job Work Basis and further used in manufacture of exempted final products viz. Brass Parts of Agriculture Products which is exempted from payment of Central Excise Duty? - denial of benefit of exemption N/N. 67/95-C.E. in respect of intermediate products viz. Brass Casted Rod used captively for manufacture of exempted goods - denial on the ground that the exemption contained in the said Notification does not apply to inputs used in or in relation to the manufacture of final products which are exempted from the whole of duty of excise leviable thereon or are chargeable to NIL rate of duty. HELD THAT - From the Rule 6 it can be seen that as per sub-rule (1) of Rule 6 the assessee is not required to avail the Cenvat credit in respect of the inputs used in the manufacture of exempted goods. As per the fact of the present case it is undisputed fact that the appellant during the impugned period not registered with the Central Excise Department hence has not availed the Cenvat credit in respect of any of the inputs used either in the final product or in the intermediate product i.e., Brass Casted Rods. Therefore the condition of sub-rule (1) of Rule 6 stands complied with. The finding of the adjudicating authority as regard the applicability of above notification is misleading and absolutely incorrect - the appellant has discharged the obligation under Rule 6(1) accordingly they are legally entitled for the exemption Notification No. 67/95-C.E. dated 16-3-1995 in respect of their intermediate product i.e. Brass Casted Rods. In the present matter appellant also claimed exemption alternately under the provisions of Notification No. 08/2003 -CE dated 01.03.2003. Since as per the finding appellant are legally entitled for the exemption Notification No. 67/95-C.Edated 16.03.1995 in respect of their intermediate products i.e. Brass Casted Rods the alternative exemption claimed by the Appellant need not be discussed. Whether any exemption from duty can be available to the Appellant as regard to the intermediate products viz. Brass Casted Rods manufactured by the Appellant through Job Worker and further used in manufacture of exempted goods? - HELD THAT - In the present matter Learned Adjudicating Authority disputed benefit of the N/N. 84/1994-CE dated 11.04.1994 only on ground Appellant have cleared their raw materials or semi-finished goods to the job-worker and received intermediate goods viz. Brass Casted Rods manufactured by the Job-Worker without following the prescribed conditions without preparing the job- work challans and without maintaining any records. However the said notification grants exemption to the specified goods manufactured in a factory of job worker subject to only condition that the supplier of raw materials or semi-finished goods gives an undertaking to the proper officer having Jurisdiction over the factory of the Job Worker. In the instant case in para 38 of impugned order the Ld. Adjudicating authority itself admitted that Appellant has given undertaking. Therefore benefit of said notification cannot be denied on this ground alone. Without prejudice as regard the said issue it is also found that even if the benefit of job-work notification denied to the Appellant the duty liability rests on the job worker. Therefore the show cause notice demanding duty from the Appellant on the goods manufactured by the Job-worker cannot be sustained. Once the Revenue took a view that the inputs could not have been sent to a job worker claiming the Job-work exemption Notifications and the process undertaken by the job worker amounted to manufacture and resulted in products namely Brass Casted Rods the duty liability would fall on the manufacturer who is a job worker in this case and not on the appellant. Since duty demand has been made on Brass Casted Rods and the appellant is not a manufacturer of the same the demand is not sustainable and accordingly the impugned order demanding duty from appellant is legally not correct. In the facts and circumstances of the present case the demand on this count also must be quashed and set aside. Since the entire demand has been set aside consequently penalties and demand of interest are also set aside - Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Applicability of Central Excise Duty on intermediate goods (Brass Casted Rods) used in the manufacture of exempted final products. 2. Eligibility for exemption under Notification No. 67/95-CE dated 16.03.1995. 3. Eligibility for exemption under Notification No. 8/2003-CE dated 01.03.2003. 4. Applicability of exemptions for goods manufactured on a job work basis under Notification Nos. 83/94-CE and 84/94-CE both dated 11.04.1994. 5. Validity of the demand for excise duty and penalties imposed. 6. Limitation period for issuing the demand notice. Detailed Analysis: 1. Applicability of Central Excise Duty on Intermediate Goods: The core issue was whether Central Excise Duty is payable on Brass Casted Rods manufactured by the appellant and used in the manufacture of exempted final products (Brass Parts of Agricultural Products). The adjudicating authority denied the exemption under Notification No. 67/95-CE, stating that the notification does not apply to inputs used in the manufacture of final products that are exempt from duty or chargeable to a nil rate of duty. 2. Eligibility for Exemption under Notification No. 67/95-CE: The tribunal examined Notification No. 67/95-CE, which provides for exemption on inputs used within the factory of production. The proviso to the notification excludes inputs used in the manufacture of exempted final products unless the manufacturer discharges the obligation under Rule 6 of the Cenvat Credit Rules. The appellant argued that they had not availed of Cenvat Credit, thus complying with Rule 6. The tribunal found that the appellant had indeed complied with Rule 6(1) by not availing of Cenvat Credit, making them eligible for the exemption under Notification No. 67/95-CE. 3. Eligibility for Exemption under Notification No. 8/2003-CE: The appellant alternatively claimed exemption under Notification No. 8/2003-CE, which exempts goods used as inputs for further manufacture within the factory. However, since the tribunal found the appellant eligible for exemption under Notification No. 67/95-CE, they did not further discuss the alternative exemption claim. 4. Exemptions for Goods Manufactured on Job Work Basis: The tribunal considered whether the intermediate products manufactured by job workers were exempt under Notification Nos. 83/94-CE and 84/94-CE. The adjudicating authority had denied the exemption, citing non-compliance with procedural requirements like job work challans and record maintenance. However, the tribunal noted that the primary condition for exemption under Notification No. 84/94-CE was the undertaking by the supplier of raw materials, which the appellant had provided. Therefore, the benefit of the notification could not be denied on procedural grounds alone. 5. Validity of the Demand for Excise Duty and Penalties: The tribunal held that even if the job work exemption was denied, the duty liability would rest on the job worker, not the appellant. Therefore, the demand for excise duty from the appellant was not sustainable. Consequently, penalties and interest demands were also set aside. 6. Limitation Period for Issuing the Demand Notice: The appellant argued that the demand was barred by limitation, as the department was aware of their activities from prior searches and show cause notices. The tribunal did not explicitly address this issue in the final judgment, as the demand was already quashed on other grounds. Conclusion: The tribunal set aside the impugned order, allowing the appeals with consequential reliefs. The appellant was found eligible for exemption under Notification No. 67/95-CE, and the demand for excise duty and associated penalties were quashed. The tribunal emphasized compliance with procedural requirements but ruled in favor of the appellant based on substantive compliance with the primary conditions of the relevant notifications.
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