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TMI Blog2024 (12) TMI 789X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the Hon ble Supreme Court in the case of International Auto [ 2005 (3) TMI 132 - SUPREME COURT] . As per sub-clause (iii) the valuation of the goods manufactured on job work basis which were not sold as such by the prime manufacturer from the premise of job worker or his premises, i.e. (i) and (ii) of the said rules than the value of said goods for valuation of the said goods will be by application of the valuation rules mutatis mutandis. From Rule 4 (5) (a) of the CENVAT Credit Rules, 2004, it is evident that the said rule is enabling rule and procedure for clearance of the goods by the person who avails the CENVAT Credit for processing of the said goods and procedure for maintenance of records and the return of said goods. Inclusion of the value of free-supplied materials in the assessable value for excise duty - benefit of N/N. 214/86-CE - HELD THAT:- The assessable value of the goods for the purpose of payment of duty is to be determined as per section 4 of the Central Excise Act, 1944 read along with the Central Excise (Determination of Price of Excisable Goods) Valuation Rules, 2000. Rule 6 of the valuation rules has been reproduced in the impugned order which clearl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E MR. P.K. CHOUDHARY, MEMBER (JUDICIAL) AND HON BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) Shri Atul Gupta, Advocate for the Appellant Shri Santosh Kumar, Authorised Representative for the Respondent SANJIV SRIVASTAVA: This appeal is directed against Order In Original NO. 15/COMMR./NOIDA/2015-16 dated 20.07.2015 of, Commissioner, Central Excise, Noida I. By the impugned order following has been held: ORDER 1. I, hereby, confirm the demand of Central Excise duty of (BED-Rs 6971810/- + Ed. Cess. Rs 139436/-+ SHE Cess Rs 69718/-)= Rs. 71,80,964.00 (Rupees Seventy One Lakhs Eighty Thousand Nine Hundred and Sixty Four Only) against M/s J S Wire links Pvt. Ltd., D-253., Sector-10., Noida under Section 11A(10) of the Central Excise Act, 1944. 2. I order the recovery of interest as prescribed rate on the above amount on Rs. 71,80,964.00. (Rupees Seventy One Lakhs Eighty Thousand Nine Hundred Sixty Four Only) under Section 11AA/11AB of the Central Excise Act, 1944 as applicable 3. I also impose penalty of Rs. 71,80,964.00 (Rupees Seventy One Lakhs Eighty Thousand Nine Hundred Sixty Four Only) on them under Section 11AC of the Central Excise Act, 1944 read with Rule 25 of the Central Exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do the same even after several reminders. Hence, the party were summoned vide C. No. 20/Audit/J S Wire/IV/N-1/19/2013/73 dt. 31.03.14 for providing year wise details along with job work challans and value of the goods received free of cost from M/s Nippon Audiotronix Ltd. for job work. On the basis of the information/ challans provided by the Appellant for the period from April-2009 to March-2014 vide their letter dated 04.04.14, duty short paid has been computed as in table below: YEAR Assessable Value Rate of Duty % BED Ed. Cess Sh.Ed.Cess TOTAL 2009-10 23500540 8.24 1880043 37601 18800 1936444 2010-11 18996289 10.3 1899629 37993 18996 1956618 2011-12 14461589 10.3 1446159 28923 14462 1489544 2012-13 12564687 12.36 1507762 30155 15078 1552995 2013-14 1985136 12.36 238216 4764 2382 245363 TOTAL 6971810 139436 69718 71,80,964 2.5 A Show cause notice dated 30.04.2014 was issued to appellant asking them to show cause as to why: 1. Central Excise duty of Rs. 71, 80, 964.00 (Rupess Seventy One Lakh Eighty Thousand Nine Hundred Sixty Four only) should not he not be recoversd from them under the provisions of Section 11A (4) of the Central excise Act 1944 for the period 2009-2014. 2. Int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vt. Ltd. [2020 (374) E.L.T. 595 (Tri. - Mumbai)] The intermediate goods which are cleared by the appellant will be used by the principal manufacturer to produce the final product which are cleared on payment of duty. Therefore, the removal of intermediate goods under Rule 4(5)(a) of the Cenvat Credit Rules, 2002 is legal and correct. Reliance is placed on following case laws : o Vandana Dying Pvt. Ltd.[2014(307) E.L.T. 528 (Tr-Mumbai)] o Maharashtra Aldehydes Chemicals Ltd. [2017 (348) E.L.T. 713 (Tri. - Mumbai)] o P.R. Rolling Mills Pvt. Ltd. [2010 (249) ELT 232 (Tri- Bang)] o Haldia Petrochemicals Limited [2023 (6) TMI- 1192 -CESTAT Kolkata] o Lawkim Ltd. [2007 (218) ELT 142 (Tr- Mumbai)] o Zetadel Technologies Private Limited [2023(9) TMI 804- CESTAT Kolkata] The benefit under Notification 214/ 86-CE was alternatively available. It is the responsibility of the principal manufacturer to provide undertaking to the Assistant/ Deputy Commissioner of the Central Excise. In case of failure in executing its responsibility, the job worker may not be denied the benefit of the notification 214/84- CE. Reliance is placed on following decisions: o Fabkraft Industries [2023 (5) TMI 931 - Ces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the extended period of limitation is not invokable. Reliance is placed on: o Vandana Dying Pvt. Ltd. [2014(307) E.L.T. 528 (Tr-Mumbai)] o Maharashtra Aldehydes Chemicals Ltd. [2017 (348) E.L.T. 713 (Tri. - Mumbai)] o P.R. Rolling Mills Pvt. Ltd. [2010 (249) ELT 232 (Tri- Bang)] o Haldia Petrochemicals Limited [2023 (6) TMI- 1192 -CESTAT Kolkata] o Lawkim Ltd. 2007 (218) ELT 142 (Tr- Mumbai)] o Zetadel Technologies Private Limited [2023(9) TMI 804- CESTAT Kolkata] The unit has been audited in the past, but no objection was raised in the earlier audit- All facts were in the knowledge of the department The department had conducted audit of the appellant's records for the financial year 2006-2007,2007-2008, and 2008-2009 in the month of November, 2009. The appellant has been following the procedures of clearing the goods to the principal manufacturer by paying the duty on the value of its own inputs and job work charges from the year 2006- 2007. Hence, the department was in knowledge of the working of the appellant from the year 2009 when the first audit was conducted Reliance is placed on the Gannon Dunkerley Co. Ltd [2021 (47) G.S.T.L. 35 (Tri. - Del.)] where it was concluded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty, therefore, no penalty is imposable. The impugned order is vague and has been passed eyond the scope of the show cause notice. It is submitted that the Show Cause Notice was issued on the basis that the party had contravened Rule 6 Rule 10A of the Central Excise valuation (Determination of Price of Excisable Goods) Rules, 2000. However, the Ld. Commissioner in the impugned order, has relied on Rule 8 and Rule 11 in order to calculate the assessable value. This a situation is not sustainable as it is simply beyond the scope of show cause notice, hence the impugned order is liable to set aside on this ground only. Reliance is placed on: o Brindavan Beverages (P) Ltd. Ors. [(2007) 5 SCC 388] o SACI Allied Products Ltd. [2005 (183) ELT 225 (SC)] o Ramlala [2023 SCC Online ALL 2479] o Inox Leisure Ltd. [2022 (60) G.S.T.L. 326 (Tri. - Hyd.)], affirmed by the Supreme Court as reported at [2022 (61) G.S.T.L. 342 (S.C.)] o Ballarpur Industries Ltd., [(2007) 8 SCC 89] o Suresh Synthetics, [(2021) 19 SCC 599] o Toyo Engg. India Ltd., [(2006) 7 SCC 592 o Hindustan Polymers Co. Ltd. [(1997) 11 SCC 302] o Jitendra Kumar [2023 SCC OnLine All 2837] The show cause notice has just vaguely tried t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been included in the price actually paid or payable, shall be treated to be the amount of money value of additional consideration flowing directly or indirectly from the buyer to the assessee in relation to sale of the goods being valued and aggregated accordingly, namely:- i) value of materials, components, parts and similar items relatable to such goods; ii) value of tools. dies, moulds, drawings, blue prints, technical maps and charts and similar items used in the production of such goods. iii) value of material consumed, including packaging materials, in the production of such goods iv) value of engineering, development, art work, design work and plans and sketches undertaken elsewhere than in the factory of production and necessary for the production of such goods Rule 10A - Where the excisable goods are produced or manufactured by a job-worker, on behalf of a person (hereinafter referred to as principal manufacturer), then. (i) in a case where the goods are sold by the principal manufacturer for delivery at the time of removal of goods from the factory of job- worker, where the principal manufacturer and the buyer of the goods are not related and the price is the sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the original manufacturer has been alleged to be sale and so it has been stated that the value of the goods sold has to be arrived based on the transaction value plus the value of the material supplied free of cost by the principal manufacturer. So the party were required to add the value of material supplied free of cost by the principal manufacturer while assessing the value of the final product and pay differential central excise duty along with interest. Further Board's Circular No.643/34/2002-CX.dated 1st July, 2002 issued vide F. No 6/39/2000 - CX Government of India, Ministry Of Finance, Department Of Revenue Central Board of Excise Customs clearly clarifies the doubts under the new Valuation Rules made effective from 1/7/2000 and as per point 13 of the Circular it is described that how will valuation of samples be done which are distributed free, as part of marketing strategy, or as gifts or donations? in a manner specified as. Since the goods are not sold section 4(1)(a) will not apply and recourse will have to be taken to the Valuation Rules. No specific rule covers such a contingency. Except rule 8 all the other rules cover contingencies where sale is involved in so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cost by the principal manufacturer in their assessable value. Accordingly, hold that the cost of the materials supplied free of cost by the principal manufacturer to the job-worker is includable in the their assessable value and the party is liable to pay the Central Excise duty leviable thereon under Section 3 of the Central Excise Act 1944 read with Rule 6 and Rule 10 A of Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000. Further, I find that the party failed to submit the required information/challans as asked by the Range Officer through various letters whereas the requisite documents were submitted only after issuance of Summon dated 31.03.2014. In view of above, the party has clearly contravened the provision of Rule 6 Rule 10A of Central Excise valuation the (Determination of Price of Excisable Goods) Rules, 2000 in as much as they did not assess the transaction value in a proper manner by not including value of materials, components, parts and similar items that were being received from the principal manufacturer and used in the manufacture of goods on job work basis for discharging the duty liability. They have also not disclosed these fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ously refunded by reasons of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made there-under with intent to evade payment of duty, the person who is liable to pay duty as determined under sub section (2) of Section 11A, shall also be liable to pay a penalty equal to the duty so determined. From above, I find that the imposition of penalty under Section 11AC has rightly been proposed in the impugned show cause notice as the party intentionally did not include parts of inputs supplied free of cost on the value on the final product which should be included in the assessable value for payment of Central Excise duty in terms of Rule 6 of Central Excise Valuation (Determination Of Price Of Excisable Goods) Rules, 2000 inasmuch as they did not assess the transaction value in a proper manner by not including value of materials, components, parts and similar items that were being received from the principal manufacturer and used in the manufacture of goods on job work basis for discharging the duty liability. They have also not disclosed these facts to the department and intentionally suppressed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration. This Court has repeatedly held that the pleadings are meant to give to each side intimation of the case of the other so that it may be met, to enable courts to determine what is really at issue between the parties, and to prevent any deviation from the course which litigation on particular causes must take. 10. The object of issues is to identify from the pleadings the questions or points required to be decided by the courts so as to enable parties to let in evidence thereon. When the facts necessary to make out a particular claim, or to seek a particular relief, are not found in the plaint, the court cannot focus the attention of the parties, or its own attention on that claim or relief, by framing an appropriate issue. As a result the defendant does not get an opportunity to place the facts and contentions necessary to repudiate or challenge such a claim or relief. Therefore, the court cannot, on finding that the plaintiff has not made out the case put forth by him, grant some other relief. The question before a court is not whether there is some material on the basis of which some relief can be granted. The question is whether any relief can be granted, when the defe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substantial matter relating to the title of both parties to the suit was touched, tough indirectly or even obscurely in the issues, and evidence has been led about them then the argument that a particular matter was not expressly taken in the pleadings would be purely formal and technical and cannot succeed in every case. What the Court has to consider in dealing with such an objection is : did the parties know that the matter in question was involved in the trial, and did they lead evidence about it? If it appears that the parties did not know that the matter was in issue at the trial and one of them has had no opportunity to lead evidence in respect of it, that undoubtedly would be a different matter. To allow one party to rely upon a matter in respect of which the other party did not lead evidence and has had no opportunity to lead evidence, would introduce considerations of prejudice, and in doing justice to one party, the Court cannot do injustice to another. (emphasis supplied) The principle was reiterated by this Court in Ram Sarup Gupta (dead) by LRs., vs. Bishun Narain Inter College [AIR 1987 SC 1242]: It is well settled that in the absence of pleading, evidence, if any, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra) referred to above and several other decisions of this Court following the same cannot be construed as diluting the well settled principle that without pleadings and issues, evidence cannot be considered to make out a new case which is not pleaded. Another aspect to be noticed, is that the court can consider such a case not specifically pleaded, only when one of the parties raises the same at the stage of arguments by contending that the pleadings and issues are sufficient to make out a particular case and that the parties proceeded on that basis and had led evidence on that case. Where neither party puts forth such a contention, the court cannot obviously make out such a case not pleaded, suo moto. 4.4 The case has been clearly spelt out against the appellant in the show cause notice, and it has been stated specifically and clearly that appellant were not including the value of free supply material from prime manufacturer, while clearing the job worked goods on payment of duty. Thus they were determining the assessable value contrary to the provisions of Rule 6 and Rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. Even the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld naturally include the value of grey fabrics supplied to the independent processors for the processing. However, excise duty, if any, paid on the grey fabrics will be given proforma credit to the independent processors to be utilised for the payment on the processed fabrics in accordance with the Rules 56A or 96 D of the Central Excise Rules, as the case may be. Even the Referring Bench did not doubt the correctness of the inclusion in the assessable-value the cost of the Grey fabric and the processing charges. The Referring Bench held: We cannot accept the contention of the learned counsel on behalf of the petitioners and the appellants that the value of the grey cloth which is processed by the processor should not be included in the assessable value of the processed fabric.... 29. In the argument, as presented, that the assessable value would include what is referred to as the post manufacturing profits , there is an obvious fallacy. In Atic Industries Ltd. v. H.H. Dave, Asstt. Collector of Central Excise and Others [1975 (3) SCR p. 563] Bhagwati J. speaking for the Court said: The value of the goods for the purpose of excise must take into account only the manufacturing cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble, the price at which an article of the like kind and quality was sold or capable of being sold at the time of removal of the article chargeable with duty. The nature of the excise duty is not to be confused with, or tested with reference to, the measure by which the tax is assessed. The standard adopted as the measure of assessment may throw light on the nature of the levy but is not determinative of it. When a statutory measure for assessment of the tax is contemplated, it need not contour along the lines which spell out the levy itself. , and a broader based standard of reference may be adopted for the purposes of determining the measure of the levy. Any statutory standard which maintains a nexus with the essential character of the levy can be regarded as a valid basis for assessing the measure of the tax. 30. In the case of processing-houses, they become liable to pay excise duty not because they are the owners of the goods but because they cause the manufacture of the goods. The dimensions of the Section 4(1) (a) and (b) are fully explored in a number of decisions of this Court. Reference may be made to the case of Bombay Tyres International. Consistent with the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -iterated the above principles and held as follows: 16. The present case is similar to Ujagar Print s case. In Ujagar Prints case, it was the grey cloth which was given to the processor whereas in the present case it was the raw material for the manufacture of biscuits given to the appellant. After the biscuits are made, they are given back to or are delivered under the instructions of Britannia. The appellant was entitled to receive processing charges which include its expenses plus profits for the purpose of determining the excise value. However, the cost of the raw material supplied by Britannia will have to be included in addition to the appellant s manufacturing costs and profit. What cannot be included on the ratio of Ujagar Prints case is any profit of Britannia or expenses which are incurred after the manufacture of the biscuits by the appellant. Despite repeated attempts made by the learned counsel for the respondent, we are unable to distinguish this case from the ratio laid down by this Court in the aforesaid two decisions of Ujagar Prints case. 4.7 In case of S. Kumars Ltd [2005 (190) E.L.T. 145 (S.C.)], Hon ble Supreme Court again observed as follow: 18. The actual who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) and the Valuation Rules. It is their submission that the concept of deemed sale at the processors factory introduced by M/s. Ujagar Prints III, does not strictly fall with in Valuation Rules 4 or 5. They urged, and the Tribunals view was, that M/s. Ujagar Prints III applied the procedure prescribed in Rule 6(b)(ii). As we have seen Rule 6(b) deals with excisable goods which are not sold by assessee but are used or consumed by him or on his behalf in the production or manufacture of other articles. In such case, the value of the excisable goods is to be based either (i) on the value of the comparable goods produced or manufactured by the assessee or by any other assessee, or if that is not possible under (ii) on the cost of production or manufacture, including profits, if any, which the assessee would have normally earned on the sale of such goods. 22. We do not agree that if Section 4(1)(b) is invoked Rules 4 and 5 do not apply. We have already held that Rule 3 does not make any distinction between the rules which may be invoked even when Section 4(1)(b) is invoked. If none of the rules i.e. 4, 5 or 6, in terms apply, then Rule 7 would. In other words, the sale which is referre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used by the principal manufacturer in the manufacture of final product remained undisputed. M/s. Thermax as a job worker manufactured boiler parts for M/s. Thermax Babcock using the inputs supplied to it and cleared the same back to M/s. Thermax Babcock who used such intermediate goods in manufacture of final products but did not pay any duty on clearance of such final products. 7.1 The term manufacture is defined under Section 2(f) of the Central Excise Act which includes any process - (i) Incidental or ancillary to the completion of a manufactured product; and (ii) Which is specified in relation to any goods in the Section or Chapter notes of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture; or (iii) Which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration 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 labou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xemption under sub-section (1) in respect of any excisable goods from the whole of the duty of excise leviable there on has been granted absolutely, the manufacturer of such excisable goods shall not pay the duty of excise on such goods.] [(2) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by special order in each case, exempt from payment of duty of excise, under circumstances of an exceptional nature to be stated in such order, any excisable goods on which duty of excise is leviable.] [(2A) The Central Government may, if it considers it necessary or expedient so to do for the purpose of clarifying the scope or applicability of any notification issued under sub-section (1) or order issued under sub-section (2), insert an explanation in such notification or order, as the case may be, by notification in the Official Gazette at any time within one year of issue of the notification under sub-section (1) or order under sub-section (2), and every such explanation shall have effect as if it had always been the part of the first such notification or order, as the case may be.] (3) An exemption under sub-section (1) or sub-section (2) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Central Excise Rules, 1944, the Central Government hereby exempts goods specified in column (1) of the Table hereto annexed (hereinafter referred to as the said goods) manufactured in a factory as a job work and :- (a) used in relation to the manufacture of final products, specified in column (2) of the said Table, (i) on which duty of excise is leviable in whole or in part; or (ii) for removal 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 for supply to the United Nations or an international organisation for their official use or for 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, or (iii) for removal under bond for export, or (b) cleared as such from the factory of the supplier of raw materials or semi-finished goods - (i) on payment of duty for home consumption (on which duty of excise is leviable whether in whole or in part); or (ii) without payment of duty under bond for e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of raw materials or semi-finished goods supplied to the job worker, so as to complete a part or whole of the process resulting in the manufacture or finishing of an article or any operation which is essential for the aforesaid process. Explanation II shall be omitted. (vide Notification No. 33/2000-C.E., dated 31-3-2000) TABLE Description of Inputs Description of final products (1) (2) All goods falling under the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than high speed diesel oil and motor spirit, commonly known as petrol. All goods falling under the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than the following, namely :- (i) matches; (ii) fabrics of cotton or man-made fibres falling under Chapter 52, Chapter 54 or Chapter 55 of the First Schedule to the said Act; (iii) fabrics of cotton or man-made fibres falling under Heading Nos. 58.01, 58.02, 58.06 (other than goods falling under sub-heading No. 5806.20), 60.01 or 60.02 (other than goods falling under sub-heading No. 6002.10) of the First Schedule to the said Act. In terms of the above notification, it transpires that it is only in respect of goods covered by Para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o has sent the input or partially processed inputs outside his factory to a job worker may, by an order, which shall be valid for a financial year, in respect of removal of such input or partially processed input, and subject to such conditions as he may impose in the interest of revenue including the manner in which duty, if leviable, is to be paid, allow final products to be cleared from the premises of the job worker. 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. 7.5 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that case, it is the ultimate manufacturer i.e. the job worker who has to pay the duty. Following the procedure and conditions of the Notification (supra) only by the principal manufacturer, the job worker would be saved from payment of duty on goods manufactured by him. 7.8 In the case under reference, the facts of non-payment of duty on final products by the principal manufacturer is not disputed. The goods received from the job worker were not used in the manufacture of dutiable final products but in goods on which no duty was paid. In such case when the principal manufacturer did not intend to pay duty on the final products, the job worker who is manufacturer of intermediate goods is liable to pay duty. Non-compliance of Notification No. 214/86-C.E., dated 25-3-1986 by the principal manufacturer has resulted into duty liability upon the job worker. Moreover, it is admitted by the appellant (job worker) that the inputs were not sent by the principal manufacturer under Notification No. 214/86-C.E. If the contention of the appellant is accepted it would lead to the situation where neither the principal manufacturer nor the job worker would pay duty, which has not been legislated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has been availed. It is nothing to do with the duty payment of goods. 7.11 Rule 4(6) is a facility to the principal manufacturer to clear the goods directly from the premises of job worker after payment of duty. Notably it is not the case of the appellant that the principal manufacturer paid duty at anytime as the goods manufactured by him were exempted from duty. Thus the liability for payment of duty on such intermediate goods manufactured by the job worker is on job worker only. 7.12 The Tribunal order in case of Vandana Dyeing Pvt. Ltd. v. CCE, Mumbai - 2014 (307) E.L.T. 528 (Tri.) and Mukesh industries Ltd. v. CCE, Ahmedabad - 2009 (248) E.L.T. 203 (Tri.) were rendered considering Rule 4(5)(a) of Cenvat Credit Rules, 2001 and 2002 Rules as pari materia to 57F(4) of erstwhile Central Excise Rules, 1944. However in our considered view Rule 57F(4) provided for payment of duty by the principal manufacturer whereas Rule 4(5)(a) only provides sending of Cenvat availed inputs for job work and return of same to the principal manufacturer implying that the principal manufacturer shall pay duty on the same. Accordingly those judgments are of no help to the appellant. 7.13 Even the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Duty liability - Job worker - Respondents receiving grey MMF and knitted or crocheted fabrics from principal manufacturer under the cover of challans issued under Rule 4(5)(a) of Cenvat Credit Rules, 2001 and after completion of job work the goods stand returned to the principal manufacturer - Rule 57F(3) of erstwhile Central Excise Rules, 1944 and Rule 4(5)(a) ibid being independent provisions, fact that goods were not specified in the Notification No. 214/86-C.E. will not make a difference - No duty liability can be fastened upon the job worker - Section 3 of Central Excise Act, 1944. [para 4]. Similarly in the case of Dhana Singh Synthetics Pvt. Ltd. v. CCE, (supra) it was held as under : Demand - Job worker - Fabric received by job worker accompanied with Challans issued under Rule 57F(5) of erstwhile Central Excise Rules, 1944 corresponding to Rule 4(5)(a) of Cenvat Credit Rules, 2002/2004, which returned after processing to principal manufacturer under said Challans without payment of excise duty - Demand raised as processed fabric not exempt under Notification No. 214/86-C.E. - HELD : Inputs received under Central Excise Challans and not under Notification No. 214/86-C.E. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Notification No. 214/86-C.E. The Tribunal rightly held that if the job worker has paid duty even though he was eligible to avail exemption under the Notification, the principal manufacturer was eligible for the credit thereof as he was liable to pay duty on clearance of the final goods. Tribunal held that had the Notification No. 214/86 not issued, even under Rule 57F(2) the job worker had to pay duty. Thus it follows that it is only by virtue of notification (supra) the goods manufactured at job workers end are exempted only if the same or the final product in which such intermediate goods are used are liable for duty at the end of the principal manufacturer which is absent in the present reference. 7.17 In case of Collector v. Bright Steel Mac Fabrics - 1994 (69) E.L.T. 276 (Tribunal) as upheld by the Hon ble Apex Court in case of CCE v. Bright Steel Mac Fabrics - 1997 (94) E.L.T. A145 (S.C.), the Tribunal has rightly held that Rule 57F(2) does not envisage return of inputs after completion of processing resulting in a semi-finished goods or intermediate goods without payment of duty. 7.18 In case of Desh Rolling Mills v. CCE, Delhi - 2000 (122) E.L.T. 481 (Tri.), the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C.) held that the assessee job worker i.e. the appellant failed to bring any evidence on record to prove that the supplier of raw material had supplied the materials to them under the provisions of Notification No. 214/86 and thus the duty demand against the assessee undertaking job work was upheld. The ratio laid down in the said judgment is squarely applicable to the present reference. 7.20 In case of Commissioner v. Span Heat Transfer Equip. Mfrs. P. Ltd. - 2001 (135) E.L.T. 861 Tribunal held that the Notification No. 214/86-C.E. envisages the duty payment by the supplier of the goods for job work if he undertakes to pay the same. In the normal course of business, it is the job worker being manufacturer is liable to pay duty. We are in agreement with such views of the Tribunal as in absence of undertaking by the principal manufacturer to discharge duty liability on the job worked goods, it is the manufacturer of goods i.e. job worker who is liable to pay duty. The order of Tribunal in case of M/s. Jinabakul Forge Pvt. Ltd. v. Commissioner - 1997 (93) E.L.T. 373 (Tri.) relied upon by the Revenue is also on the identical issue. Same views has been taken by the Tribunal in case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e final product is removed from such manufacturers ‟ factory. As far as the appellant, (the intermediate purchaser) is concerned, it is not liable to pay duty on the inputs supplied by TELCO since it had not taken the credit for the Modvat in respect of inputs. It is submitted that it cannot be called upon to pay the duty in respect of those inputs nor can the value of the inputs be added to the excisable value of the assemblies. 6. We are of the view that the submission of the appellant is correct. The Tribunal appears to have been confused between the manufacture of the final product, namely, excavators and the manufacture of the intermediate product, namely, the floor plate assemblies. The scheme of Modvat permits the person who clears the ultimate final product to take the benefit of the Modvat scheme at the time of clearance of such final product. The manufacturer of the final product, in this case TELCO, would therefore, be entitled not only to adjust the credit on the inputs supplied by it to the intermediate purchaser such as the appellant but also to the credit for the duty paid by the intermediate purchaser on its products. The reliance on the decision in Burn Stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by application of the valuation rules mutatis mutandis. 4.12 Rule 16A was also inserted in Central Excise Rules, 2002 by Notification No 17/2003-CE (NT) dated 13.03.2003 with effect 01.04.2003 from to provide as under: RULE 16A Removal of goods for job work, etc.. Any inputs received in a factory may be removed as such or after being partially processed to a job worker for further processing, testing, repair, re-conditioning or any other purpose subject to the fulfilment of conditions specified in this behalf by the Principal Commissioner of Central Excise or Commissioner of Central Excise, as the case may be] having jurisdiction. 4.13 Rule 4 (5) (a) of the CENVAT Credit Rules, 2004 (5) (a) The CENVAT credit shall be allowed even if any inputs or capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair, re-conditioning or any other purpose, and it is established from the records, challans or memos or any other document produced by the manufacturer or provider of output service taking the CENVAT credit that the goods are received back in the factory within one hundred and eighty days of their being sent to a job work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities undertaken by the job worker amounts to manufacture, the job worker is construed as the manufacturer and, therefore, the job worker becomes liable to pay excise duty. However, by Notification No. 214/86-C.E., dated 25-3-1986, it has been provided that instead of the job worker, the liability can be discharged by the principal manufacturer subject to the conditions mentioned in the said notification. 8.4 Cenvat Credit Rules provide for taking credit by the principal manufacturer and sending the material without reversing the credit for the purpose of job work. It also provides for taking credit on any input or input service used in the manufacture of intermediate product by the job worker. This is evident from Rule 3 of the Cenvat Credit Rules the relevant portion of which read as under : Rule 3 - Cenvat credit. - A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit of including the said duties, or tax, or cess paid on any input or input service, as the case may be, used in the manufacture of intermediate products, by a job worker availing the benefit of exemption specified in the notification of the Government of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s established from the records, challans or memos or any other document produced by the manufacturer or provider of output service taking the Cenvat credit that the goods are received back in the factory within one hundred and eighty days of their being sent to a job worker and if the inputs or the capital goods are not received back within one hundred eighty days, the manufacturer or provider of output service shall pay an amount equivalent to the Cenvat credit attributable to the inputs or capital goods by debiting the Cenvat credit or otherwise, but the manufacturer or provider of output service can take the Cenvat credit again when the inputs or capital goods are received back in his factory or in the premises of the provider of output service. 9.5 From the above, it could be seen that removal of the goods by manufacturer-appellant under Rule 4(5)(a) of the Cenvat Credit Rules is not restricted for the purpose of manufacture of excisable goods and it can also be for the purpose of undertaking any process which may not amount to manufacture. 9.6 Rule 4(5)(a) of the Cenvat Credit Rules is a self contained rule envisaging that a manufacturer who was eligible to take credit, having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sable value of the goods for the purpose of payment of duty is to be determined as per section 4 of the Central Excise Act, 1944 read along with the Central Excise (Determination of Price of Excisable Goods) Valuation Rules, 2000. Rule 6 of the valuation rules has been reproduced in the impugned order which clearly provide for addition of any additional consideration received by the appellant in any form to the transaction value for arriving at the assessable value. In terms of the decision of the Hon ble Supreme Court in case of Ujjagar Prints Pawan Biscuits and similar other decisions the value of raw material supplied for job work should have been added to arrive at the assessable value. The determination of assessable value made under the Section matter, is not subjected to admissibility of CENVAT credit to the appellant in respect of free supply material. The provisions contained in Section 2 (h) of Central Excise Act, 1944 and Rule 10A and Rule 6 of the Valuation Rules, 2000 were not before the Hon ble Supreme Court in the case of International Auto. Thus in our view the ratio of the said decision will not apply to the facts of the present case which is for the period post in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction arises only in case of doubt in regard to the intention of the legislature manifest on the statutory language. Indeed, the need to resort to any interpretative process arises only where the meaning is not manifest on the plain words of the statute. If the words are plain and clear and directly convey the meaning, there is no need for any interpretation. It appears to us the true rule of construction of a provision as to exemption is the one stated by this Court in Union of India v. Wood Papers Ltd. [(1990) 4 SCC 256 = 1990 SCC (Tax) 422 = JT (1991) SC 151]. Three important aspects which comes out of the discussion are the recognition of horizontal equity by this Court as a consideration for application of strict interpretation, subjugation of strict interpretation to the plain meaning rule and interpretation in favour of exclusion in light of ambiguity. 38. We will now consider another Constitution Bench decision in Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal, (2011) 1 SCC 236 = 2010 (260) E.L.T. 3 (S.C.) [hereinafter referred as Hari Chand case for brevity]. We need not refer to the facts of the case which gave rise to the questions for consideration b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... octrine of substantial compliance and intended use . The relevant portions of the observations in paras 31 to 34 are in the following terms - 31. Of course, some of the provisions of an exemption notification may be directory in nature and some are mandatory in nature. A distinction between the provisions of a statute which are of substantive character and were built in with certain specific objectives of policy, on the one hand, and those which are merely procedural and technical in there nature, on the other, must be kept clearly distinguished... Doctrine of substantial compliance and intended use 32. The doctrine of substantial compliance is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can reasonably be expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the essence or the substance of the requirements. Like the concept of reasonableness , the acceptance or otherwise of a plea of substantial compliance depends upon the facts and circumstances of each case and the purpose and object to be achieved and the context of the pre-requisites which are essential to achieve t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther words, a mere attempted compliance may not be sufficient, but actual compliance with those factors which are considered as essential. 41. After thoroughly examining the various precedents some of which were cited before us and after giving our anxious consideration, we would be more than justified to conclude and also compelled to hold that every taxing statute including, charging, computation and exemption clause (at the threshold stage) should be interpreted strictly. Further, in case of ambiguity in a charging provisions, the benefit must necessarily go in favour of subject/assessee, but the same is not true for an exemption notification wherein the benefit of ambiguity must be strictly interpreted in favour of the Revenue/State. 42. In Govind Saran Ganga Saran v. Commissioner of Sales Tax, 1985 Supp (SCC) 205, this Court pointed out three components of a taxing statute, namely subject of the tax; person liable to pay tax; and the rate at which the tax is to be levied. If there is any ambiguity in understanding any of the components, no tax can be levied till the ambiguity or defect is removed by the legislature [See Mathuram Agrawal v. State of Madhya Pradesh, (1999) 8 SCC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench unanimously pointed out that an exemption from taxation is to be allowed based wholly by the language of the notification and exemption cannot be gathered by necessary implication or by construction of words; in other words, one has to look to the language alone and the object and purpose for granting exemption is irrelevant and immaterial. 45. In Parle Exports case (supra), a Bench of two-Judges of this Court considered the question whether non-alcoholic beverage base like Gold spot base, Limca base and Thumps Up base, were exempted from payment of duty under the Central Government notification of March, 1975. While considering the issue, this Court pointed out the strict interpretation to be followed in interpretation of a notification for exemption. These observations are made in para 17 of the judgment, which read as follows : How then should the Courts proceed? The expressions in the Schedule and in the notification for exemption should be understood by the language employed therein bearing in mind the context in which the expressions occur. The words used in the provision, imposing taxes or granting exemption should be understood in the same way in which these are unders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quent decision in Wood Papers Ltd. case (supra). In para 6, it was observed as follows : ... In Collector of Central Excise v. Parle Exports (P) Ltd., (1989) 1 SCC 345, this Court while accepting that exemption clause should be construed liberally applied rigorous test for determining if expensive items like Gold Spot base or Limca base of Thums Up base were covered in the expression food products and food preparations used in Item No. 68 of First Schedule of Central Excises and Salt Act and held that it should not be in consonance with spirit and the reason of law to give exemption for non-alcoholic beverage basis under the notification in question . Rationale or ratio is same. Do not extend or widen the ambit at stage of applicability. But once that hurdle is crossed construe it liberally. Since the respondent did not fall in the first clause of the notification there was no question of giving the clause a liberal construction and hold that production of goods by respondent mentioned in the notification were entitled to benefit. 46. The above decision, which is also a decision of two Judge Bench of this Court, for the first time took a view that liberal and strict construction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of it must go to the State.... 50. In Tata Iron Steel Co. Ltd. v. State of Jharkhand, (2005) 4 SCC 272, which is another two-Judge Bench decision, this Court laid down that eligibility clause in relation to exemption notification must be given strict meaning and in para 44, it was further held - The principle that in the event a provision of fiscal statute is obscure such construction which favours the assessee may be adopted, would have no application to construction of an exemption notification, as in such a case it is for the assessee to show that he comes within the purview of exemption (See Novopan India Ltd. v. CCE and Customs). 51. In Hari Chand case (supra), as already discussed, the question was whether a person claiming exemption is required to comply with the procedure strictly to avail the benefit. The question posed and decided was indeed different. The said decision, which we have already discussed supra, however, indicates that while construing an exemption notification, the Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication form should be filled up following that procedure alone. This was enunciated by Privy Council in the Nazir Ahmad v. King Emperor [1936 SCC OnLine PC 41], wherein it was held that that where a power is given to do a certain thing in a certain way the thing must be done in that way or not at all. Other methods of performance are necessarily forbidden. 15. A three Judge Bench of this Court in a judgment reported as Chandra Kishore Jha v. Mahavir Prasad Ors. [(1999) 8 SCC 266], held as under: 17....................It is a well-settled salutary principle that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner. (See with advantage: Nazir Ahmad v. King Emperor, Rao Shiv Bahadur Singh v. State of V.P. [AIR 1954 SC 322 : 1954 SCR 1098] , State of U.P. v. Singhara Singh [AIR 1964 SC 358 : (1964) 1 SCWR 57] .) An election petition under the rules could only have been presented in the open court up to 16-5- 1995 till 4.15 p.m. (working hours of the Court) in the manner prescribed by Rule 6 (supra) either to the Judge or the Bench as the case may be to save the period of limitation. That, however, was not d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I have come across is the art of dodging tax without breaking the law. Much legal sophistry and judicial exposition have gone into the attempt to differentiate the concepts of tax evasion and tax avoidance and to discover the invisible line supposed to exist which distinguishes one from the other. Tax avoidance, it seems, is legal: tax evasion is illegal. Though initially the law was, and I suppose the law still is, there is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be. implied'', during the period between the two world wars, the theory came to he propounded and developed that it was perfectly open for persons to evade (avoid) income tax if they could do so legally. For some time it looked as if tax avoidance was even viewed with affection. Lord Sumner in inland Revenue Commissioners v. Fishers Executors [[1926] A.C. 39S] said: My Lords the highest authorities have always recognized that the subject Is entitled so to arrange his affairs as not to attract taxes imposed by the Crown so far as he can do so within the law, and that be may legitimately claim the advantage of any expressed term or of any emotions that be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arried through as a whole. Later again he observed, ... For the taxpayers it was said that to accept the revenue's wide contention involved a rejection of accepted and established canons and that, if so general an attack upon schemes for tax avoidance as the revenue suggest is to be validated, that is a matter for Parliament. The function of the courts is to apply strictly and correctly the legislation which Parliament has enacted: if the taxpayer escapes the charge, it is for Parliament, if it disapproves of the result, to close the gap. General principles against' tax avoidance are, it was claimed, for Parliament to lay down. We were referred, at our request, in this connection to the various enactments by which Parliament bas from time to time tried to counter tax avoidance by some general prescription. The most extensive of these is Income and Corporation Taxes Act 1970, sections 460 et seq. We were referred also to well known sections in Australia and New Zealand (Australia, Income Tax Assessment Act 1936-51, section 260; New Zealand, Income Tax. Act 1976, section 99, replacing earlier legislation). Further it was pointed out that the capital gains tax legislation (sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial end) into which there are inserted steps that have no commercial purpose apart from the avoidance of a liability to tax which in the absence of those particular steps would have been payable. The difference is in approach. It does not necessitate the overruling of any earlier decisions of this House ; but it does involve recognising that Lord Hamlin's oft-quoted dictum in !RC v. Duke of West minister(') Every man is entitk:d if he can to order his affairs so as that the tax attaching under the appropriate Acts h less then it otherwise would be , tell us Ii/Ile or nothing as to what methods of ordering one's affairs will be recognised by the courts as effective to lesson the tax what would attach to them if business transactions were conducted in a straight-forward way. . I have referred to the English cases at some length, only to show that in the very country of its birth, the principle of West minister has been given a decent burial and in that very country where the phrase 'tax avoidance' originated the judicial attitude towards tax avoidance has changed and the smile, cynical or even affectionate though it might have been at one time, has now frozen int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to determine the true legal relation resulting from a transaction. If the parties have chosen to conceal by a device the legal relation, it Is open to the taking authorities to unravel the device and to determine the true character of relationship. But the legal effect of a transaction cannot be displaced by probing into the substance of the transaction . We think that time has come for us to depart from the West minister principle as emphatically as the British Courts have done and to dissociate ourselves from the observations of Shah, J. and similar observations made elsewhere. The evil consequences of tax avoidance are manifold. First there is substantial loss of much needed public revenue, particularly in a welfare state like ours. Next there is the serious disturbance caused to the economy of the country by the piling up of mountains of black money, directly causing inflation. Then there is the large hidden loss to the community (as pointed out by Master Sheat craft in 18 Modern Law Review 209) by some of the best brains in the country being involved in the perpetual war waged between the tax-avoider and his expert team of advisers, lawyers and accountants on one side and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s we uphold the demand of central excise duty demand for interest will follow as natural consequence (as per decisions referred in impugned order) and the penalties imposed under section 11AC of the Central Excise are justified in view of the decision of Hon ble Supreme Court in case of Rajasthan Spinning and Weaving Mill [2009 (238) ELT 3 (SC)] wherein following has been observed: 17. The main body of Section 11AC lays down the conditions and circumstances that would attract penalty and the various provisos enumerate the conditions, subject to which and the extent to which the penalty may be reduced. 18. One cannot fail to notice that both the proviso to subsection 1 of Section 11A and Section 11AC use the same expressions : ....by reasons of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty,... . In other words the conditions that would extend the normal period of one year to five years would also attract the imposition of penalty. It, therefore, follows that if the notice under Section 11A(1) states that the escaped duty was the result of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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