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TMI Blog2023 (11) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... ERSUS COMMISSIONER OF CENTRAL EXCISE, DELHI [ 2004 (8) TMI 106 - SUPREME COURT] wherein the Hon ble Apex Court held that when the final product has been subject to duty, it cannot be said that intermediate product which is cleared without payment of duty is an exempted good for compliance with the provisions of Rule 57C of erstwhile Modvat Credit. Thus, the demand cannot sustain. The impugned order is set aside. Appeal is allowed. - HON BLE MS. SULEKHA BEEVI C. S. , MEMBER ( JUDICIAL ) HON BLE MR. VASA SESHAGIRI RAO , MEMBER ( TECHNICAL ) Ms. J. Ragini , Advocate For the Appellant Mr. Harendra Singh Pal , Assistant Commissioner ( A. R ) For the Respondent ORDER ORDER : Per Ms. SULEKHA BEEVI C. S. Brief facts are that the appellant is engaged in manufacture of forgings and are also registered with the Central Excise Department. During the course of audit of accounts, it was noticed by the department that the appellant has received raw materials like Steel Bars, Steel Rounds from M/s.Tractor Engineers Ltd., Pune (TENGEL) for conversion into forgings on job work basis. After the job work, the appellant cleared the forgings to M/s.TENGEL without payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 The Ld. Counsel relied upon the decision of the Hon ble Apex Court in the case of Escorts Ltd. Vs CCE Delhi - 2004 (171) ELT 145 (SC) to argue that in the said case, the Hon ble Apex Court reversed the judgment of the Tribunal wherein it was held that when the goods have been cleared to another factory of the assessee without payment of duty, the credit availed on common inputs and input services is not eligible. The Hon ble Apex Court held that when the final product is subject to duty, the credit cannot be denied. 2.3 The Larger Bench of the Tribunal in the case of Sterlite Industries (I) Ltd. Vs CCE Pune - 2004 (12) TMI 108 CESTAT MUMBAI was relied by the counsel to submit that the Larger Bench considered the issue as to whether the credit of duty paid on the inputs used in the manufacture of final products cleared without payment of duty for further use in the manufacture of final product which is cleared on payment of duty by the principal manufacturer would be hit by the provisions of Rule 57C (erstwhile Modvat Credit Rules which stated that credit cannot be availed on exempted goods). The issue was answered in favour of the assessee as decided by the Hon ble Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) wherein the Hon ble Apex Court held that when the final product has been subject to duty, it cannot be said that intermediate product which is cleared without payment of duty is an exempted good for compliance with the provisions of Rule 57C of erstwhile Modvat Credit. Relevant para of the judgment reads as under : 8. It is to be seen that the whole purpose of the Notification and the Rules is to streamline the process of payment of duty and to prevent the cascading effect if duty is levied both on the inputs and the finished goods. Rule 57D(2), which has been extracted hereinabove, shows that in the manufacture of a final product an intermediate product may also come into existence. Thus in cases where intermediate product comes into existence, even though no duty has been paid on the intermediate product as it is exempted from whole of the duty or is chargeable to Nil rate of duty, credit would still be allowed so long as duty is paid on the final product. 9. In cases of manufacturers like the Appellants the final product is the tractor. The intermediate product would be parts which are manufactured for being used in the tractor. In such a case the parts would n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e exempted, which situation can arise only when there is an exemption notification issued under Section 5A of the Central Excise Act or the final product is chargeable to nil rate of duty. Expression chargeable to nil rate of duty or exempted from whole of duty was considered by the Tribunal in the case of Orissa Synthetics Ltd. v. Collector of Central Ex. [1995 (77) E.L.T. 350 (Tri.)] and after taking note of the Ministries clarifications issued vide Circular No. 10/75/CX.6. it was held that clearance under goods under provision of 191BB for export without payment of duty would not get covered by the above expression. Reference was made to the advice received from the Ministry of Law dealt in the paragraph of 9 in the said decision. It was opined in the said letter of the Law Ministry that the term 'exempted' has a definite connotation. The same as attributed to the notification issued by the Central Government. Similarly, the chargeable to nil rate of duty would refer to the tariff rate being nil and the goods cleared in terms of provision of Rule 199BB would not be covered by the said expression inasmuch as the same are not chargeable to nil rate. In the present case, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g used in the tractor. In such a case the parts would not be the final product. Thus Rule 57C would have no application. The mere fact that the parts are cleared from one factory of the Appellants to another factory of the Appellants would not disentitle the Appellant from claiming benefit of Notification No. 217/86-C.E., dated 2nd April, 1986. As stated above, the Notification itself clarifies that the inputs can be used within the factory of production or in any other factory of the same manufacturer. By applying the ratio of the above decision, it becomes clear that Modvat credit of duty paid on the inputs used in the manufacture of final product cleared without payment of duty for further utilisation in the manufacture of final product, which are cleared on payment of duty by the principal manufacturer, would not be hit by provision of Rule 57C. Inasmuch as, the matter stands decided by the Honourable Supreme Court, we would hold in favour of assessee. 5. As regards the decision in the case of Alpha Lavan laying down that the Modvat credit could be claimed in such a situation, we find the earlier decision of the Bajaj Auto was not followed. However, in view of the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. Vs CCE Jaipur 2017 (5) GSTL 327 (Tri.-Del.), we find that impugned orders cannot be sustained. 8. Even on merits, we find that the matter is amply covered by the Tribunal in Federal Mogul Goetze India Ltd. Vs CCE Bangalore 2015 (318) ELT 340 (Tri.-Bang.) where inter alia, it was held that Notification No.214/86-CE, though issued under Section 5A of Central Excise Act, 1944, is not per se an exemption notification. The relevant portion of the order is reproduced below : 10.2 The Notification 214/86, 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 214/86 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 ul ..... 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