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TMI Blog2012 (7) TMI 713X X X X Extracts X X X X X X X X Extracts X X X X ..... e job worker-appellant is in order. - (d) Job worker-appellant cannot be held to have provided any exempted services attracting the provisions of Rule 6 of CENVAT Credit Rules. - (e) The job worker appellant cannot be held to have had any intention to evade excise duty/service tax. - (f) The credit taken by the manufacturer appellant of the service tax paid by the job worker appellant is in order. X X X X Extracts X X X X X X X X Extracts X X X X ..... to June 2008. Out of the above Rs. 2,08,33,809/- was credit of input services specified under Rule 6 (5) of the CENVAT Credit Rules. Balance of Rs. 5,67,35,173/- related to other input services. (f) They availed CENVAT credit of Rs. 44,61,066/- on common inputs such as chromium acid and anodes. 4.1 Show-cause notice dated 09.01.2009 was issued alleging that the job worker-appellant was manufacturing dutiable goods and providing exempted service (chrome plating) and that they had not maintained separate accounts in terms of Rule 6(2) of CENVAT Credit Rules 2004 and, therefore, they were required to reverse a total sum of Rs. 6,11,96,239/- (Rs. 44,61,066 + Rs. 5,67,35,173) and proposing penalties. In pursuance of the show-cause notice, the Commissioner passed the impugned order dated 07.09.2009 confirming the demand as proposed along with interest and appropriating Rs. 2,02,00,275/- paid as service tax. He also imposed penalty of Rs. 2,00,000/- under Rule 25 of the Central Excise Rule on the job worker-appellant. In addition, he also imposed a penalty of Rs. 2,00,000/- on Shri Subramani, the other appellant. 4.2 It was held that the job worker-appellant had wrongly paid servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il CENVAT credit of duty paid on input or input services used by the job worker. (g) Demand of 4,49,78,867/- relating to the period March 2005 to September 2007 from job worker-appellant is clearly time barred as there is no mis-declaration and the issue involved interpretation of complex legal provision. (h) For the same reason no penalty can be imposed. 5.2. In support of the above submissions, he relies on the following decisions: a) Sterlite Industries (I) Ltd. Vs. CCE, Pune - 2005 (183) ELT 353 (Tri.-LB) b) CCE, Mumbai III Vs. Dil Ltd. - 2008 (9) STR 411 (Tri.-Mum.) c) Maersk India Pvt. Ltd. Vs. CCE, Raigad - 2008 (12) STR 150 (Tri.-Mum.) d) Spic (HCD) Ltd. Vs. CCE, Chennai - 2006 (201) ELT 386 (Tri.-Chennai) e) Pascal Paramount Pvt. Ltd. Vs. CCE, New Delhi - 1998 (98) ELT 199 (Tri.) f) IOCL Vs. CCE, Guntur - 2006 (206) ELT 533 (Tri.-Bang.) g) CCE & Cus. Vs. MDS Switchgear Ltd. - 2008 (229) ELT 485 (SC) h) CCE & Cus., (Appeals), Ahmedabad Vs. Narayan Polyplast - 2005 (179) ELT 20 (SC) i) CCE & Cus., Vadodara Vs. Narmada Chematur Pharmaceuticals Ltd. - 2005 (179) ELT 276 (SC) j) CCE, Chandigarh Vs. Industrial Cables (I) Ltd. - 1999 (108) ELT 513 (Tri.) k) Shrir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ongly availed the same and, therefore, the same deserves to be recovered along with penal consequences. 8.1. It would be appropriate to recall the concept of job work and the legal implications under the Excise law. 8.2. The practice of getting certain processes done by job worker and getting goods manufactured on job work basis is a widely prevalent practice in the manufacturing section. A person who is sending material to a job worker is being referred to as principal manufacturer and the person who undertakes the processes or manufacture the product for job charges is treated as a job worker. The activities/processes undertaken by the job worker may amount to manufacture as per Central Excise Law or it may not. The job worker, in addition to using the material supplied by the principal manufacturer, may use his own material for undertaking the job work and the job charges collected by him will, obviously, include the cost of his own material used by him for the job work. In other words, in respect of job-worked item the raw materials are contributed partly by the principal manufacturer and the rest by the job worker. Labour is contributed by the job worker. When the job-work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty paid on the said piston rings. The said raw material has been sent to the job worker-appellant under material movement challans for the purpose of chrome plating. We agree with the findings of the Commissioner that the activities of chrome plating does not amount to manufacture in the hands of the job worker-appellant and, therefore, the chrome plated piston rings are not excisable goods . 9.2. It is not in dispute that the manufacturer appellant having taken CENVAT credit can send the materials in terms of Rule 4 (5) (a) of the CENVAT Credit Rules for the purpose of undertaking certain processes whether such processes amount to manufacture or not. Therefore, the job worker-appellant could have undertaken the job work of chrome plating and returned the job-worked material to the manufacturer-appellant without payment of duty in terms of Rule 4 (5) (a) of the CENVAT Credit Rules. 9.3. Once chrome plated piston rings are not treated as excisable goods at the hands of job worker-appellant, the question of availing any exemption at his end does not arise and therefore, the said goods cannot be treated as exempted goods. 9.4. Rule 4 (5) (a) of the CENVAT Credit Rules reads as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial supplier (in this case manufacturer-appellant) undertakes to pay the duty involved. To enable such clearance without payment of duty notification 214/86 comes to the rescue of the job worker. 9.7. The job worker is also entitled to take credit of duty paid on inputs and service tax paid on input services utilized in undertaking the job work activities. This is permissible in the light of decision of the Larger Bench of the Tribunal in the case of Sterlite Industries (I) Ltd. Vs. CCE, Pune 2005 (183) E.L.T. 353 (Tri.-LB). In the said decision, the Tribunal considered the interplay of Rule 57F and Rule 57C of the erstwhile Central Excise Rules. In the said case, the principal manufacturer who has taken credit on inputs has sent the inputs under 57F to the job worker for certain processes and the job worker who has used inputs received by him in the activities of job work was held to be eligible for credit on such inputs even though the job-worked goods were returned to the principal manufacturer without payment of duty by the said job worker. The relevant portion of the said decision is as under: Modvat credit of duty paid on the inputs used in the manufacture of final pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut payment of duty under bond for export; or (iia) by a manufacturer of dutiable and exempted final products, after discharging his obligation in respect of said goods under rule 6 of the CENVAT Credit Rules, 2002; or (iii) without payment of duty to a unit in a free trade zone or to a hundred per cent export-oriented undertaking or to a unit in an Electronic Hardware Technology Park or Software Technology Parks or supply to the United Nations or an international organization for their official use or supply to projects funded by them, on which exemption of duty is available under notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 108/95-Central Excises, dated the 28th August, 1995, from the whole of the duty of excise leviable thereon, which is specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), the additional duty of excise leviable thereon, which is specified in the Schedule to the said Special Importance Act and National Calamity Contingent duty leviable under sub-section (1) of section 136 of the Finance Act, 2001 (14 of 2001). (2) The exemption contained in this notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Notification 214/1986, though has been issued under Section 5A of the Central Excise Act, the same is not an exemption notification per se. A job worker who undertakes the job work which is amounting to manufacture is, legally, the manufacturer. In respect of goods manufactured on job work basis cleared by the job worker, he is required to pay excise duty due at the time of clearance of job-worked goods to the raw material supplier. Notification 214/1986 basically provides an option to the job worker not to pay the excise duty if the raw material supplier undertakes to pay the excise duty on the said products and undertakes to use them for further manufacture of excisable goods which are ultimately cleared on payment of duty. In other words, it does not exempt the duty on the job-worked items but it merely shifts the liability to a person other than the job worker and also shifts the date of payment of duty that is instead of reckoning from the date of clearance from the premises of the job worker, the same is to be reckoned from the date of clearance by the principal manufacturer (the person who supplied material to the job worker for the purpose of getting job work done). T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... einafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service of production of goods on behalf of the client referred in sub-clause (v) of clause (19) of section 65 of the said Finance Act, from the whole of service tax leviable thereon under section 66 of the said Finance Act : Provided that the said exemption shall apply only in cases where such goods are produced using raw materials or semi-finished goods supplied by the client and goods so produced are returned back to the said client for use in or in relation to manufacture of any other goods falling under the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), as amended by the Central Excise Tariff (Amendment) Act, 2004 (5 of 2005), on which appropriate duty of excise is payable. Explanation. - For the purposes of this notification, - (i) the expression production of goods means working upon raw materials or semi-finished goods so as to complete part or whole of production, subject to the condition that such production does not amount to manufacture within the meaning of clause (f) of section 2 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x. Therefore, at any rate, there is no justification for imposing penalties under the above mentioned rules and section. 13. As regards the manufacturer-appellant, it has been held that the job worker-appellant having wrongly paid service tax has consequently passed on inadmissible CENVAT credit amounting to Rs. 2,02,00,275/-. We do not agree that the job worker - appellant has wrongly paid the service tax as we have already held that there was no merit in the finding that the job worker appellant was bound to avail the service tax exemption. In view of the above, the question of the manufacturer - appellant taking the credit wrongly does not arise. 14. From the foregoing, the following emerges: a) Manufacturer-appellant taking credit on piston rings in coil form and sending the same under Rule 4 (5) (a) for the purpose of chrome plating is in order. b) As the activity of chrome plating does not amount to manufacture and no excisable goods emerge, there is no question of exemption from excise duty and, therefore, levy of service tax is attracted on the said activities. c) The exemption under Notification No. 8/2005 ST being a conditional exemption subject to fulfillment of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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