2024 (11) TMI 121 - AT - Central Excise

Denial of benefit of the exemption notification for job work - whether the appellant is liable to pay central excise duty on the goods manufactured by them on job work basis under Notification No.214/86-CE dated 25.03.1986 for M/s. Neelgiri Electricals, who were availing the area based exemption under Notification No.49 50/2003-CE and were clearing the goods at Nil rate of duty? - levy of interest and penalty as well - HELD THAT - Having perused the decision in M/S. R.N. ALLOYS VERSUS COMMISSIONER OF CENTRAL GOODS SERVICE TAX, UTTARAKHAND 2023 (11) TMI 364 - CESTAT NEW DELHI , it is found that identical facts were involved in the said case, where the principal manufacturer, who supplied the raw materials/inputs to the job worker, was availing the benefit of area based exemption under Notification No.50/2003-CE dated 10.06.2003 and, therefore, were not paying the central excise duty on their final products. Considering the provisions of the notification and the conditions specified therein, it was noticed that the principal manufacturer had not submitted the undertaking that the goods shall be removed on payment of duty for home consumption from his factory. In the present case, M/s. Neelgiri Electricals, being the principal manufacturer was availing the benefit of the area based exemption notification and, was, therefore, clearing the goods at Nil rate of duty and in that view, they have not furnished the undertaking as required under the notification that the supplier of the raw material or semi-finished goods gives an undertaking that the said goods shall be removed on payment of duty for home consumption from his factory. As a result, neither the appellant, who is the job worker has paid the duty nor the principal manufacturer, who was availing the area based exemption, paid the central excise duty, which is not the intention of the notification and the interpretation thereof placed by the various decisions. If the principal manufacturer has not discharged the tax liability, the burden would fall on the job worker and in that view, the appellant is liable to discharge the duty liability. Penalty - HELD THAT - The Authorities below have rightly imposed the penalty on the appellant as well as on the Director. It was within the knowledge of the appellant that M/s. Neelgiri Electricals was availing the exemption of central excise duty under the area based exemption notification as mentioned on the job work challan and also as admitted by Shri Raghu Nandan Chhimpa, Manager and Authorised Signatory of the appellant in his statement recorded under Section 14 of the Act on 17.05.2023. Interest - HELD THAT - As the appellant had failed to pay the central excise duty, they are liable to pay interest thereon under Section 11AA of the Act. There are no merits in this appeal and, therefore, the impugned order is upheld. The appeal, accordingly stands dismissed.

Summary

Issues:
1. Denial of exemption notification for job work.
2. Liability to pay central excise duty on goods manufactured on job work basis.
3. Applicability of exemption under Notification No. 214/86-CE.
4. Imposition of penalty on the appellant and Director.
5. Liability to pay interest under Section 11AA of the Act.

Analysis:
1. The appellant challenged the denial of the exemption notification for job work in the appeal. The appellant, engaged in manufacturing copper wires on a job work basis for another company, was denied the benefit of the exemption notification. The appellant was not paying Central Excise duty under the job work notification as the goods were not used further in the manufacture of final products on which excise duty was leviable. A show cause notice was issued, leading to an Order-in-Original confirming the demand and imposing penalties. The appeal before the Commissioner (Appeals) was rejected, leading to the current appeal.

2. The main issue was whether the appellant was liable to pay central excise duty on goods manufactured on a job work basis under Notification No. 214/86-CE. The appellant argued they were under the impression that no duty was payable as the purchase order showed a 'Nil' rate of duty. However, the exemption under the notification is only available when duty is paid on final products, which was not the case here. The Department argued that the appellant had suppressed material facts and cited a recent Tribunal decision to support their position.

3. Referring to a previous decision, the Tribunal found that the principal manufacturer, who was availing area-based exemption, had not fulfilled the conditions of the notification. The Tribunal highlighted that the liability to pay duty is transferred from the job worker to the principal manufacturer under specific conditions outlined in the notification. Since the principal manufacturer did not discharge the tax liability, the burden fell on the job worker, making the appellant liable to pay the duty.

4. The Authorities rightly imposed penalties on the appellant and the Director, as it was within their knowledge that the principal manufacturer was availing central excise duty exemption. The Manager of the appellant admitted this fact in his statement. The failure to pay central excise duty led to the imposition of penalties and interest under Section 11AA of the Act.

5. Ultimately, the Tribunal upheld the impugned order, dismissing the appeal on the grounds that the appellant failed to pay central excise duty, making them liable for the duty, penalties, and interest. The decision was pronounced on 4th November 2024.