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TMI Blog2024 (9) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... ce case, the tests stand satisfied and the goods manufactured by the appellant amounts to manufacture. Who is liable to pay duty? - Whether the supplier of raw materials or the job-worker (appellant)? - HELD THAT:- Admittedly, none of these conditions have been satisfied and therefore, the Commissioner considering the clearances made were on principal-to-principal basis has rightly demanded duty from the job worker. Whether non-compliance of these conditions is only procedural as claimed by the appellant needs to be examined. The Supreme Court of India in the case of Commissioner of C. Ex., New Delhi vs. Hari Chand Shri Gopal [ 2010 (11) TMI 13 - SUPREME COURT ] observed that 'The mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. In Novopan Indian Ltd. [ 1994 (9) TMI 67 - SUPREME COURT ], this Court held that a person, invoking an exception or exemption provisions, to relieve him of tax liability must establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Chapter Heading 8517 7010 of Central Excise Tariff Act (CETA), 1985. Since, the process of stuffing and soldering of components on the Printer Circuit Boards (PCB) supplied by the customers amounted to manufacture under Section 2(f) of the Central Excise Act (CEA), 1944, the appellant was liable to pay duty on the same. Therefore, the Commissioner in the impugned orders invoking the extended period of limitation confirmed duty demand along with applicable interest. He also imposed equivalent penalty under Section 11AC of the Central Excise Act, 1944 along with penalty under Rule 25 and 26 of the Central Excise Rules 2002. Aggrieved by this orders, the appellant is in appeal before us. 3. The learned counsel on behalf of the appellant has made the following submissions: The Appellants had taken over M/s. Design Assemblies Inc. which was a partnership firm which was undertaking job work of assembling components such as capacitors, resistors, inductors, transistors, diodes, chips, integrated circuits on to printed circuit board (PCB) supplied by following customers, namely: i) 100% EOU or STPI units or SEZ units. ii) Duty paying units who send raw material under job work challans or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liance was placed on the Hon ble Tribunal Judgements in the case of Salem Weld Mesh Vs. Commissioner of Central Excise, Salem reported in 2007 (218) E.L.T 401 (Tri. Chennai) and in the case of Bharat Foundry Vs. Commissioner of Central Excise Ahmedabad II reported in 2009 (246) E.L.T 561(Tri. Ahmd). (ii) That demand for the period prior to 07.03.2012 is clearly time barred, as the Audit Party in Letter dated 05.10.2009 had sought details and was satisfied. (iii) Without prejudice, Appellants submitted that in respect of 100% EOU, STPI units, Govt. and Defence supplies and those suppliers under Rule 4 of the Cenvat Credit Rules, 2004 are otherwise exempted. The Appellants gave details category wise and stated that the worst case against them would be demand of Rs.5,87,685/-. 3.3 The learned counsel further stated that as per Notification No.36/2001-CE(NT) dated 26.6.2001, the Principal Manufacturer is exempted from registration under Rule 9 of Central Excise Rules if he authorises the job worker to comply with all procedural formalities under the Central Excise Act, 1944. Thus, if the Principal Manufacturer has not authorized the appellant, the liability will be on the Principal Man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (v) that the job worker received goods are used in the manufacture excisable goods which are exempted under Notification No.6/2006-CE dated1.3.2006 (vi) that they have sent inputs under Rule 4(5)(a) of CCR, 2004. 3.6 During investigation, the suppliers informed that either they are exempted from payment of Excise duty or are paying duty on final products manufactured out of job worked goods. For instance, a letter from ASTRA Microwave Products Ltd. confirmed that all the goods manufactured by them are excisable goods only and they are sending raw material/inputs to the Appellants; letter from Precimeasure Controls Pvt. Ltd. to the Commissioner also declared that the PCBs assembled in their main temperature controllers (final product) were sold on payment of Central Excise duty; and letter from B. S. Industries declared that they are below Excise duty exemption limit. Thus, the suppliers were availing exemption or paying excise duty on the final products which has been confirmed during investigation and therefore, substantial compliance of the condition of Notification No.214/1986 has been done. 3.7 The counsel further submits that the Appellants were also getting inputs from 100% E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Science, Bangalore. Notification No.70/1992-CE dated 17.6.1992 granted exemption to goods manufactured in a factory as a job work and used in undertaking specified in the table for manufacturer of goods for supply to ministry of Defence, the specified undertaking is M/s. Bharat Electronics Ltd. and Others. Sections 26 of SEZ Act, 2006 clearly provided the exemption without any condition. Therefore, the observations made by learned Commissioner are without any basis in disregarding alternative submissions. 3.10 The learned Commissioner has erred in invoking extended period when the issue involved interpretation of duty liability and there are decisions holding that even if suppliers have not filed declaration, the job worker is eligible for exemption and further, the Audit on 5.10.2009 had enquired on this point and were satisfied that no duty was payable by the job worker. Therefore, the duty demand only for the normal period i.e.. 8.3.2012 to 2.3.2015 as the period covered in the notice is 1.2.2008 to 31.10.2012. 3.11 With regard penalty on the Managing Director, the issue involved being of interpretation and the liability on the job worker will not be there if all the records m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve of Notification is unambiguously clear and could be met only by strict compliance. (ii) Forging Machinery Manufacturing Co. vs. C. C. E. S. T., Jalandhar: 2018 (364) E. L. T. 208 (Tri Chan.) wherein it was held that Chapter X is an elaborate procedure required to establish beyond doubt that the goods manufactured and cleared by NSSC stands reached in the factory of recipient and the stands further used by recipient in the manufacture of their product. The ratio of the above decision cannot be adopted and applied in the present case where the assessee has not filed the declaration intending to avail benefit of excisable Notification especially when such Notification and option stands intimated to the Revenue in the Form of AR 3 returns, In the present case also by sending goods in Annexure - II mentioning the Notification no. 214/ 86 C. Ex., suppliers have made clear their intention of availing Notification No. 214/86 C. Ex. (iii) Techfab India Industries Ltd. vs. Commissioner of C. Ex., Daman: 2016 (343) E.L.T. 418 (Tri.-Ahmd.), wherein the judgement of the Hon'ble Supreme Court is distinguished in Para 04 and 14. 3.14 The Appellants provided detailed differential duty calcu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... animal feed or prawn feed. The supreme court observed that the purpose of interpretation is essentially to know the interpretation of legislative and mandatory requirements of exemption clause should be interpreted strictly and the directory conditions of such Exemption Notification can be condoned if there is a substantial compliance with the main requirements. The core issue was that in the event of ambiguity in an Exemption Notification, the benefit of such ambiguity go to the subject/assessee. The Hon ble Supreme Court stated that they are only concerned in this case with a situation where there is ambiguity in an exemption Notification. Therefore, it is submitted that in the present case there is no ambiguity in the Notification and the issue involved in these appeals is whether Appellants here complied conditions of Notification substantially and whether duty, if any payable, is paid by Principal Manufacturer and job worked goods are used. It is humbly submitted that ratio of this constitutional bench judgment is not applicable to the case of Appellants. (iii) Hon ble Supreme Court in the case of CCE, Patna vs. Shapoorji Pallonji Co. P. Ltd. - 2023 (79) GSTL 145 (SC), has di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods were being sent to the principal manufacture and therefore, merely because the procedure adopted for job work as per Notification No. 214/86 CE is not followed, the Department cannot demand duty from the job worker. 4. The Authorised Representative on behalf of the Revenue has submitted that the appellant, M/s, Smile Electronics Ltd., are engaged in the activity of manufacture and clearance of Populated Printed Circuit Boards (PPCB) falling under Chapter sub-heading 8517 7010 of the schedule to the CETA. During the course of audit verification, it was noticed that the appellants were manufacturing PPCBs by populating the Printed Circuit Boards (PCBs) and that the inputs required for manufacture of PPCBs were either procured by themselves or supplied free of cost by their suppliers/customers. The PPCBs manufactured using raw materials/components such as PCBs, resistors, capacitors, integrate circuits, etc., procured on their own account were cleared on payment of duty, whereas, those PPCBs manufactured using the raw materials supplied free of cost by their suppliers/customers were cleared without payment of duty through their Division M/s Design Assemblies Inc. Further ,it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ok conversion of bare PCB into PPCB and collected job charges at mutually agreed rates based on the complexity of the job and the volume of the job, etc. is not disputed. M/s. Design Assemblies Inc. a division of the appellant is exclusively engaged in undertaking of assembly of components on PCBs supplied by customers on collection of job charges. On verification of records, it was revealed that the activities undertaken in the name and style of M/s .Design Assemblies Inc. are accounted in the appellant s name and the procurement of consumables required for the job and other requirements by M/s. Design Assemblies Inc. are made through the appellant. The goods cleared on payment of duty are under the invoices of appellant and those cleared without payment of duty are under the invoices of M/s. Design Assemblies Inc. The goods cleared under the invoices of M/s. Design Assemblies Inc. are produced at the factory of the appellant using their employees and plant machinery. 4.2 After detailed investigation, it was revealed that the appellant and their customers had not followed any of the procedures laid down for the manufacture of goods under job work as per the relevant Notifications. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unless this condition of giving undertaking is fulfilled, the duty cannot be fastened on the supplier of raw materials or semi-finished goods, as they were not the manufacturers of marble slabs/tiles. We note there are several case laws that have held that the condition of the exemption notification has to be construed strictly and if any condition is not fulfilled the same cannot be applied to a situation. b) It is submitted that the appellants have not fulfilled the conditions of the Notification No.214/86 CE as amended or the conditions of Notification 36/2001 CE (NT). No declaration has been filed by the supplier of raw materials with the jurisdictional Assistant/ Deputy Commissioner as recorded by the adjudicating authority in para 29.3 of the OIO. As decided by the Hon ble Tribunal in the case of M/s. Desh rolling Mills: 2000 (122) ELT 481 held that: Notification 214/86 provides exemption to the goods manufactured in a factory as job work and used in or in relation to manufacture of final product on which duty of excise is leviable whether in whole or in part subject to the condition that supplier of raw materials gives an undertaking to the assistant collector of Central Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, the benefit of notification is not available to the goods manufactured by them. For the same reason the decision in the cases of Rubicon and Sonic Band International referred to by the ld. Advocate are not applicable. The similar views were expressed by the Tribunal in Desh Rolling Mills case, supra, wherein it was held that Notification No. 214/86 nowhere provides that the supplier of the raw material will be liable to pay the duty on the goods manufactured as a Job Work. d) The Hon ble High Court of Gujarat in the case of Apex Electricals Pvt. Ltd. vs. Union of India 1992(61) ELT 413 (Guj) has held that the job workers were no dummies of M/s Apex Electricals and therefore the job workers were actual manufacturers and M/s Apex were not liable for payment of duty. e) The Hon ble Tribunal in the case of M/s. AFL ltd. vs. CCE, Mumbai 2013 (295) E.L.T 211 Tri Mumbai has held that the job worker is the actual manufacturer. (para 12 14) f) The Larger bench of Hon ble tribunal in the case of Thermax Babcock Wilcox limited Vs. CCE Pune -1 has held that the job worker is liable to pay duty when the conditions of Notification 214/86 were not met by the principal manufacturer. (para 7.6 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -LB]} after perusing the provisions of Rule 4(5) of CCE has held that Perusal of the above sub-rules reveal that Rule 4(5)(a) is concerned only with permitting removal of inputs to the job worker by the principal manufacturer who has availed Cenvat credit on such inputs. Pertinently, Rule 4 of the Cenvat Credit Rules is concerned with the conditions under which a manufacturer is allowed to avail cenvat credit. Rule 4(5)(a), not cast any liability of duty upon the principal manufacturer who has sent the inputs for job work other than the condition that in case of non-receipt of goods within the stipulated period he shall be liable to reverse the Cenvat credit availed on such inputs. The rule is confined to the scope of Cenvat credit but has no relation with manufacture, manufacturer and payment of duty on the manufactured goods. 4.6. With regard to the job work undertaken for EOU units and SEZ units, they claim that they receive the raw materials under Annexure-9 and hence they are eligible for exemption under Notification. No. 22/2003-CE. The Board has issued a Circular No. 65/2002-Cus dated 07.10.2002 prescribing the procedure for clearance of raw materials, semi-finished goods by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /SEZ units; customers availing SSI or customers who supply to Defence and hence, the job-worked goods are exempted, therefore, they are not liable for payment of duty. They claimed that mere non-filing of declaration by supplier is only a procedural and technical lapse and the same cannot be a reason for denial of exemptions and demand of duty is not sustainable. Referring to the above submissions the Adjudicating Authority held that they are not eligible for the exemption of the said Notifications since the process undertaken by them amounted to manufacture, and failed to intimate the department of the process undertaken by them and no procedures were followed. 4.9 With regard to limitation, it is submitted that the appellant was clearing similar goods manufactured by them on payment of duty clearly admits that they were aware of the fact the process undertaken by them amounted to manufacture and that the goods manufactured by them were liable for duty. Inspite of that they have intentionally evaded payment of appropriate Central Excise duty. Further, even though show-cause notices were issued for evading duty payment, they continued to follow their own procedure and cleared the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uding the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer, and the word manufacturer shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account; 5.3 The process of populating the PCBs by the appellant as a job worker is not in dispute. As long as there is transformation of a product into a new product marketable and commercially known comes into existence, manufacture takes place. In the instance case, there is no dispute that the appellant receives raw materials and converts them into a populated PCB which is recognised as entirely a different product and returns the same to the supplier of the raw materials. 5.4 The Supreme Court of India in the case of Commissioner of Central Excise, Mumbai-IV Versus Fitrite Packers dated 2015 (324) E.L.T. 625 (S.C.) has observed as follows: 8 . In order to discern the principles that are to be applied for ascertaining as to whether a particular process amounts to manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place. 19. Interestingly, a line was drawn between cases in which the essential character had changed and those in which no such change had taken place in the following terms: 5. A large number of cases has been placed before us by the parties, and in each of them the same principle has been applied: Does the processing of the original commodity bring into existence a commercially different and distinct article? Some of the cases where it was held by this Court that a different commercial article had come into existence include Anwarkhan Mehboob Co. v. The State of Bombay and Ors. (where raw tobacco was manufactured into bidi patti), A. Hajee Abdul Shukoor and Co. v. The State of Madras (raw hides and skins constituted a different commodity from dressed hides and skins with different physical properties), The State of Madras v. Swasthik Tobacco Factory (raw tobacco manufactured into chewing tobacco) and Ganesh Trading Co. Karnal v. State of Haryana and Anr., (paddy dehusked into rice). On the other side, cases where this Court has held that although the original commodity has under gone a degree of processing it has not lost its original identity include Tungabhadra Industries Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods which are different and/or new after a particular process, such goods being marketable as such. It is in this category that manufacture of goods can be said to take place. 10. On the facts of the present case, it is to be determined as to whether the case would fall under category (2) or category (4). We have already taken note of printing process. A cursory look into the same may suggest, as held by the Tribunal, that GI paper is meant for wrapping and the use thereof did not undergo any change even after printing as the end use was still the same, namely, wrapping/packaging. However, a little deeper scrutiny into the facts would bring out a significant distinguishing feature; a slender one but which makes all the difference to the outcome of the present case. No doubt, the paper in-question was meant for wrapping and this end use remained the same even after printing. However, whereas blank paper could be used as wrapper for any kind of product, after the printing of logo and name of the specific product of Parle thereupon, the end use was now confined to only that particular and specific product of the said particular company/customer. The printing, therefore, is not merel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der to cover the process under the definition of 'manufacture'. In the instance case, the above tests stand satisfied and the goods manufactured by the appellant amounts to manufacture. 6. The second issue to be decided is who is liable to pay duty? Whether the supplier of raw materials or the job-worker (appellant). It is the contention of the appellant that the duty liability is on the supplier of the raw materials who is the principal manufacturer as per Notification No.214/86-CE dated 25.03.1986 and No.83/1994-CE dated 11.04.1994. The Commissioner in the impugned order dated 30.04.2014 has observed that M/s. Design and Assemblies Inc. (Suppliers of raw materials) is a division of M/s. Smile Electronics Limited (Appellant) who undertakes assembly of components on PCBs supplied by customers on collection of job-chargers. The populated PCBs are manufactured at the premises of the appellant independently and clears the same to the suppliers of raw materials. These facts are not disputed. Therefore, the liability to pay duty rests on the appellant. This fact is also emphasized by the Board vide Circular No.56/56/94-CX dated 14.09.1994 where it was clarified that where the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said supplier undertakes the responsibilities of discharging the liabilities in respect of Central Excise duty leviable on the finished products. THE TABLE Sl. No. Description of the said goods Description of final products (1) (2) (3) 1. Goods classifiable under any headings of Chapters 28, 29, 30, 32, 33, 34, 35, 36, 37, 38, 39, 40, 48, 70, 72, 73, 74, 75, 76, 78, 79, 80, 81, 82, 83, 84, 85, 86, 87, 88, 89, 90, 91, 92, 93, 94, 95 or 96 (other than those falling under Heading Nos. 36.03 or 37.05) of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986). Goods classifiable under any headings of Chapters 28, 29, 30, 32, 33, 34, 35, 36, 37, 38, 39, 40, 70, 72, 73, 74, 75, 76, 78, 79, 80, 81, 82, 83, 84, 85, 86, 87, 88, 89, 90, 91, 92, 93, 94, 95 or 96 (other than those falling under Heading Nos. 36.03 or 37.05) of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986). [Notification No. 83/94-C.E., dated 11-4-1994] Job work Exemption to goods specified in the SSI Exemption Notification No. 1/93-C.E., if manufactured on job work basis In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excises and Salt Act, 1944 (1 of 1944), the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore, the Commissioner considering the clearances made were on principal-to-principal basis has rightly demanded duty from the job worker. Whether non-compliance of these conditions is only procedural as claimed by the appellant needs to be examined. The Supreme Court of India in the case of Commissioner of C. Ex., New Delhi vs. Hari Chand Shri Gopal: 2010 (260) E.L.T. 3 (S.C.) observed as follows: 22 . The law is well settled that a person who claims exemption or concession has to establish that he is entitled to that exemption or concession. A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions depending upon the settings on which the provision has been placed in the Statute and the object and purpose to be achieved. If exemption is available on complying with certain conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture/process of PPCBs under job-work and nowhere they have claimed that duties not to be paid on job-worked goods. Being aware of the fact that they were themselves clearing PPCBs on payment of duty, they should have cleared the job-worked PPCBs also on payment of duty. However, the appellant claims in the year 2009 audit was conducted and the audit officer vide letter dated 05.10.2009 had written to the appellant seeking clarification regarding non-payment of duty on job-work undertaken for non-manufacturers. The appellant vide letter dated 07.01.2010 replied stating that the duty amount is not applicable for this service utilized and the matter needs to be discussed with the legal consultant. Thereafter, detailed investigation was conducted by the Preventive Officers. The Commissioner in the impugned order dated 30.04.2014 observed that the contention of the appellant that the department was aware of the job-work activity undertaken by them through the EA-2000 Audit is devoid of merit, since, if the irregularity is not noticed by the department at an earlier date, the same will not absorb the assessee from their liability to discharge appropriate duties legitimately due to the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losed herewith . There is another letter dated 27.12.2011 addressed to the Additional Commissioner of Central Excise (Preventive) by M/s. Versebyte Data Systems Private Limited wherein they have stated that the final products are cleared under exemption vide notification No. 10/97 meant for defence purpose. Similarly, M/s. Centum has also vide letter dated 13.12.2012 informed the department that the goods received from the appellant were used for the manufacture of dutiable of goods which was subsequently exported by them. M/s. Ananth Technologies Ltd; vide letter 05.01.2013 informed the department the job-work goods received from the appellant were cleared for defence purposes and hence, exempted. The appellant has placed on record enormous documents along with the letters of the suppliers to prove the fact that ultimately the goods were cleared under exemption. The appellant has also admitted as recorded in the impugned order No. 22,23 and 24/2014 dated 30.04.2014 that they may be liable to pay duty amount of Rs.38,93,659/- where the clearance is made to others, on which exemption is not applicable. 10. The appellant has produced a similar document for the relevant periods which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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