2024 (6) TMI 617 - AT - Central Excise

Exempt goods or not - whether the excisable goods, otherwise liable to duty of excise, when cleared by the Appellant to their principal manufacturer are exempted goods in terms of Notification 214/86-CE or otherwise? - HELD THAT - While a plain reading of the Notification 214/86-CE would show that the said notification has been issued under Section 5A(1) of the Central Excise Salt Act, 1944 and therefore, it appears to be an exemption notification, as argued by the learned AR or whether this exemption notification is primarily to regulate the movement of goods from the principal manufacturer to the job worker and its return to the principal manufacturer without payment of duty subject to compliance of the conditions stipulated therein. In the case of Precision Metals 2016 (4) TMI 187 - CESTAT MUMBAI , wherein the identical issue was before the Tribunal, the Coordinate Bench, after examining the legal provision as also various case laws, including Sterlite Industries (I) Ltd 2004 (12) TMI 108 - CESTAT, MUMBAI , came to the conclusion that the demand raised for an amount equivalent to 10% of value of the job work goods in terms of Rule 6(3)(b) of CCR is not sustainable. Whether the Appellants are job worker and not manufacturer and therefore, on this count itself, as alleged in the SCN, they are not entitled to take credit? - HELD THAT - It has not been disputed by Revenue that they were not eligible for Notification 214/86-CE or there has been any non-compliance of stipulated conditions. Thus, even though the issue of Notification 214/86-CE, being an exemption notification or otherwise was never alleged in the SCN though relied upon by Appellant and adjudicated upon by the Original Authority. Whether availment of Notification 214/86-CE makes the goods exempted goods so as to attract Rule 6 of CCR, 2004? - HELD THAT - The clearance of goods without payment of duty under the provisions of Notification 214/86-CE would not make the said goods exempted goods , so as to attract the provisions of Rule 6 of CCR, is squarely applicable. Since they are not to be treated as exempted goods, therefore, the Appellants have rightly taken the credit in respect of input services. Therefore, the demand made by the Department is not sustainable and the Impugned Orders are required to be set aside - Appeal allowed.

Summary

Issues Involved:
1. Admissibility of Cenvat credit on input services used for both manufacturing and job work.
2. Classification of goods cleared under Notification 214/86-CE as "exempted goods."
3. Applicability of Rule 6 of Cenvat Credit Rules, 2004.

Detailed Analysis:

1. Admissibility of Cenvat Credit on Input Services:
The Appellant, M/s Pitti Laminations Ltd, engaged in manufacturing electrical stampings and laminations, availed Cenvat credit on input services used for both their own manufacturing and job work. The Department argued that credit attributable to input services used for job work, amounting to Rs. 54,11,284/-, was inadmissible under Rule 2(l) and Rule 3 of CCR, 2004, asserting that only manufacturers, not job workers, are eligible for such credit. The Appellant contended that they were complying with Notification 214/86-CE, which allows job workers to clear goods without payment of duty, with the principal manufacturer eventually paying the duty.

2. Classification of Goods Cleared Under Notification 214/86-CE:
The Original Adjudicating Authority examined whether goods cleared to the principal manufacturer without payment of duty should be treated as exempted goods. The Authority concluded that goods cleared under Notification 214/86-CE are exempted from duty, thus attracting Rule 6(1) of CCR, which mandates the reversal of proportionate credit of input services attributable to exempted goods. The Appellant argued that Notification 214/86-CE does not make the goods "exempted goods" and cited multiple judgments to support their claim, including Federal Mogul Goetze India vs CCE and Precision Metals vs CCE.

3. Applicability of Rule 6 of CCR, 2004:
The Appellant argued that Rule 6(1) of CCR, which disallows Cenvat credit on inputs or input services used in the manufacture of exempted goods, does not apply as the goods cleared under Notification 214/86-CE are not exempted goods. They relied on the judgment in Federal Mogul Goetze India, which held that Notification 214/86-CE is not an exemption notification per se but shifts the duty liability to the principal manufacturer. The Tribunal agreed with the Appellant, referencing the Precision Metals case, which concluded that goods cleared under Notification 214/86-CE are not exempted goods and thus, Rule 6(3)(b) of CCR does not apply.

Conclusion:
The Tribunal held that the goods cleared under Notification 214/86-CE should not be treated as exempted goods and thus, the provisions of Rule 6 of CCR, 2004, do not apply. Consequently, the Appellant was entitled to avail Cenvat credit on input services used for both manufacturing and job work. The demand raised by the Department was found unsustainable, and the Impugned Orders were set aside. The appeals were allowed with consequential benefits as per law.

Order:
"Appeals are allowed with consequential benefits, if any, as per law."

(Pronounced in the Open Court on 11.06.2024)