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TMI Blog2024 (6) TMI 617X X X X Extracts X X X X X X X X Extracts X X X X ..... s/ capital goods as well as input services and utilizing the same for payment of duty on the finished goods. They were also receiving materials from certain customers for manufacture of excisable goods under the procedure laid down under Rule 16A of Central Excise Rules, 2002 and Rule 4(5)(a) of CCR read with Notification No. 17/2003-CE (NT) dt.13.03.2003. Such goods, after processing on the job work basis, were returned back to the principal manufacturer and were admittedly used in the manufacture of final products cleared on payment of duty. The Department felt that since some common input services were used both for manufacture of Appellant's own goods as well as goods processed on job work basis, the proportionate credit attributable to the input services used for processing goods on job work basis, amounting to Rs.54,11,284/-, did not appear to be admissible under CCR. The reliance was placed on Rule 2(1) and Rule 3 of CCR to come to the conclusion that only the manufacture of excisable goods of service provider is eligible to take credit of Service Tax paid on input services and not the job worker. Whereas, in the instant case, the Appellants have taken credit in respect of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be allowed on such quantity of input or input services, which are used in the manufacture of exempted goods or for provision of exempted services except in the circumstances mentioned in Sub-Rule (2). The Sub-Rule (2) & (3) provide for various options in the situation where manufacturer is manufacturing both exempted goods and dutiable goods. In this case, they were admittedly availing the provisions under Notification 214/86-CE, which has not been disputed in the Impugned Order and therefore, they were clearing the goods after processing/manufacturingto the principal manufacturer, who in turn were admittedly using them in the manufacture of their final products cleared on payment of duty. The main thrust of the argument of the learned Counsel is that the goods cleared in terms of Notification 214/86-CE are not to be treated as exempted goods so as to attract provisions of Rule 6 of CCR for the purpose of certain compliance as is applicable to the manufacturer of dutiable as well as exempted goods. He has relied on the following judgments in support of his contention that Notification 214/86-CE is not an exemption notification making the goods, as "exempted goods". 1) Federal Mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principal manufacturer without payment of duty subject to compliance of the conditions stipulated therein. 8. We have gone through the judgments cited by the Appellants and we find that in the case of Federal Mogul Goetze India (supra), on the issue as to whether Notification 214/86-CE is an exemption notification or not, it was held that the same is not an exemption notification, per se. This Order was later affirmed by Hon'ble Karnataka High Court as reported at 2016 (42) STR 427 (Kar). The relevant Para is as under: "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 manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein the value of jobwork goods deemed to have been included the jobwork goods is not exempted. Therefore, Rule 6(3)(b) which is applicable only on the clearance of exempted goods shall not apply in the case of the goods manufactured on jobwork basis under Notification 214/86." 10. In the case of Uflex Ltd (supra), the Tribunal was examining identical issue where the Appellants were manufacturing goods on which excise duty was payable as also the goods which were exempt from excise duty under Notification 214/86-CE, relying on the Larger Bench judgment in the case of Sterlite Industries (I) Ltd (supra), the Tribunal held that the said judgment was not only restricted to credit availability on input but will also be applicable to input services and therefore, the denial of credit, whether it be on input or input service, was not be upheld by relying on the ratio declared by the Larger Bench. This decision of Tribunal was further upheld by the Hon'ble Madhya Pradesh High Court as reported supra, where on Appeal from Revenue, the Hon'ble High Court went through the substantial questions of law involved in the said order of the Tribunal and came to the conclusion that the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed goods, as they were admittedly cleared in terms of Notification 214/86-CE. 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. 12. In so far as second issue whether availment of Notification 214/86-CE makes the goods "exempted goods" so as to attract Rule 6 of CCR, 2004, after going through the various judgments cited supra, we find the ratio laid down therein 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 Ordersare required to be set aside. Accordingly, we pass the following Order: "App ..... X X X X Extracts X X X X X X X X Extracts X X X X
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