M/S. Amritlal Chemaux Pvt. Ltd vs Commissioner Of Central Excise, ...

[Arising out of Order-in- Appeal No. SB/23/Th-I/10 dtd. 10/2/2010 passed by the Commissioner (Appeals) Central Excise, Mumbai Zone-I]

For approval and signature:

Honble Mr Ramesh Nair, Member(Judicial)

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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : seen of the Order?

4. Whether Order is to be circulated to the Departmental: Yes authorities? =======================================================

M/s. Amritlal Chemaux Pvt. Ltd. : Appellants

VS

Commissioner of Central Excise, Thane-I, Commissionerate : Respondent

Appearance

Shri. N. S. Patel, Advocate for the Appellants Shri. Ashutosh Nath, Asstt. Commissioner(A.R.) for the Respondent

CORAM:

Honble Mr. Ramesh Nair, Member (Judicial)

Date of hearing: 4/6/2015 Date of decision: 4/6/2015

ORDER NO.

Per : Ramesh Nair

This appeal is directed against Order-in- Appeal No. SB/23/Th-I/10 dtd. 10/2/2010 passed by the Commissioner (Appeals) Central Excise, Mumbai Zone-I wherein Ld. Commissioner(Appeals) upheld the Order-in-Original No. DP/Refund-1/08-09 dated29/7/2008 and rejected the appeal of the appellant.

2. The fact of the present case is that the appellant are manufacturer of excisable goods namely Auxiliaries and Chemicals falling under chapter 29,34,38 of the schedule to the Central Excise Tariff Act, 1985. The appellant filed refund claim of Rs. 1,52,410/- with the office on 17/7/1997. The appellant had paid Central Excise duty of Rs. 1,52,410/- under rule 57 CC of Central Excise Rules 1944 @ 8% of value of goods cleared at NIL rate of the duty on which job work was carried out under Rule 57(3). The appellant in their own claim stated that they have not reversed the cenvat credit of Rs. 50,758/- in respect of their own raw material i.e. Ethylene Oxide used in the manufacture of IP 534(exempted product) and therefore had requested for refund of differential duty of Rs. 1,01,652/-. The show cause notice No. IV(Ch 34) 18- 12/Ref/97 dated 27/1/1998 was issued proposing the rejection of the refund claim on the ground that the appellant failed to maintain separate raw material account for inputs utilized in exempted products, the final product IP 534 has not been declared under Rule 57 A and that assesse on utilization their own input had not reversed credit at the time of clearance of IP 534. The assessee resubmitted the claim on 11/11/97.

Assessee vide their reply submitted break up of labour charges also agree for deduction of Rs. 624/- from their reduced claim of Rs. 1,01,652/-being LDO used in the manufacture of IP 534 and thus had reduced the claim to 1,01,028/-. The Asstt. Commissioner vide order-in-original No. 12/97dated 26/2/1998 rejected the refund claim on the ground that the appellant have availed Cenvat Credit in respect of their own input in the processing job work goods which is exempted and appellant have not maintained separate account. Aggrieved by the above order-in-original appellant filed appeal before the Commissioner(Appeals), who vide order in appeal no. GKP(2424)/115/ MVI /2000 dated 21/1/2000 rejected the appeal and upheld the order in original. Appellant further aggrieved by the said order in appeal filed appeal before the CESTAT, CESTAT vide order No. A/524/07/C-IV/SMB/2007 dated 20/3/2007set aside the impugned order and remanded the matter to the original authority for a fresh decision in light of Tribunal judgment in the caseof Max India Ltd. (Maxmet Division) Vs. Commissioner of Central Excise, Jalandhar [2006 (197) ELT 376 (Tri-Del)].

On the remand of the matter, the appellant made representation for finalizing their refund claim of Rs. 1,52,410/- before the adjudicating authority. Asstt. Commissioner vide the order-in-original passed denovo order bearing no. DP/Refund-1/18-1/0809 dated 29/7/08 wherein once again rejected the refund claim of Rs. 1,52,410/-holding that the judgment relied upon by the appellant in the case of Max India Ltd is not applicable in the present case. Aggrieved by the said order, the appellant filed appeal before the Commissioner(Appeals) who vide impugned order upheld order in-original dated 29/7/2008 and rejected the appeal of the appellant therefore the appellant is before me.

3. Shri. N.S. Patel, Ld. Counsel for the appellant submits that the appellant have used their own inputs in the manufacture of job work goods on behalf of the principal in terms of erstwhile Rule 57(F3) of Central Excise Rules 1995. Job work goods were cleared under Notification No. 214/86CE dated 25/3/1986. Though the job work goods is exempted from payment of duty at job workers(Appellant) but in terms of Notification 214/86CE principal is discharging the excise duty on the final product where either the job work goods is used as intermediate goods or job work goods were cleared as such on payment of duty. Therefore in this particular case, the Rule 57 CC and payment of 8% therein is not applicable. He submits that appellants case is squarely covered by the judgment of this Tribunal in the case of Max India Ltd(Supra) . The Ld. Commissioner(appeals) has wrongly applied the ratio of judgments in the case of CCE Vs. Nicholas Piramal (I) Ltd [2009(244) ELT 321(BOM.)] and erred in holding that Max India Ltd is not applicable in the present case.

5. On the other hand, Shri. Ashutosh Nath, Asstt. Commissioner(A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He further submits that Rule 57 CC does not distinct the exemption under notification 214/86-C.E. and other exemption, therefore for any reason if the goods are exempted, assessee in terms of Rule 57-CC required to pay 8% of the value of the exempted goods, therefore the Ld. Commissioner(Appeals) rightly rejected the appeal of the appellant. In support of his submission, he placed reliance on following judgments;

(a) Commissioner of C. Ex. Nagpur Vs. Ballarpur Industries Ltd.[2007(215) ELT 489(S.C.)]

(b) Commissioner of C. Ex. Pune Vs. Hi-Mile Rubber Pvt Ltd.[2011(267) ELT 231(Tri. Mumbai)]

(c) Commissioner of C. Ex. Thane-I Vs. Nicholas Piramal (India) Ltd[2009(244) ELT 321(Bom.)]

(d) Syschem (India) Ltd Vs. Commissioner of C. Ex. Panchkula[2010(261) ELT 586(Tri- Del.)]

5. I have carefully considered the submissions made by both sides.

6. I find that the fact is not under dispute that the goods which are cleared without payment of duty and on the payment of 8% under Rule 57-CC is manufactured as job work goods under Rule 57F (3) and under exemption notification No. 214/86 therefore Cenvat credit is not deniable on the input used in the manufacture of job work goods at the job workers end. Though it is covered by Notification No. 214/86 but it is not exempted from payment of excise duty whereas it only temporary defers the excise duty liability for the reason that as per the condition of notification No. 214/86 principal is required to pay excise duty on the final product or if job work is removed as such therefore it cannot be said that job work goods cleared without payment of duty is exempted goods. Rule 57 CC and requirement of payment of 8% of value of job work goods cannot be made applicable. Ld. Commissioner(Appeals) has gravely erred in not applying the ratio of judgment in case of Max India Ltd which contains similar facts as in the present case. The Ld. Commissioner (Appeals) has applied the ratio of Honble Bombay High Court judgment in the CC, Ex, Thane-I Vs. Nicholas Piramal (I) Ltd. which is not on the issue that Rule 57 CC is applicable in case of removal of job work goods under Notification 214/86, therefore ratio of the said judgment was not applicable and Commissioner has wrongly applied the same. In case of Max India Ltd this Tribunal has held as under:

6. The appellants are manufacturing metallised films? and clearing the same on payment of duty and also undertaking the job-work of metallising films on the films supplied by the principal manufacturer and after metallising the same were cleared without payment of duty to the principal manufacturer. The principal manufacturer further used these films in the manufacture of pouches which were cleared on payment of duty. Notification No. 214/86-C.E. provides the exemption from payment of Central Excise duty on the goods manufactured in a factory as a job-work which are further used in the manufacture of final products on which duty of excise is leviable. The appellants are working under this Notification regarding which the necessary declaration is filed by the principal manufacturer. The Revenue confirmed the demand on the ground that the appellants were clearing the goods without payment of duty on which credit has been taken under Rule 6(3)(b) of the Cenvat Credit Rules. This Rule provides that the manufacturer is liable to pay amount equal to 8% of the exempted final products charged by the manufacturer for the sale of such goods. The contention of the appellant is that in respect of the goods which were manufactured on job-work basis there is no sale and in absence of sale, the provisions of this Rule is not applicable. The appellants relied upon the decision of the Tribunal in the case of Indian Smelting & Refining Co. Ltd. (supra) and in this case, the Tribunal after relying upon the earlier decision of the Tribunal in the case of Ballarpur Industries Ltd. v. CCE, [2001 (138) E.L.T. 94 (T)] held as under:-

Counsel for the appellant relies upon the decision of this Tribunal in Ballarpur Industries v. CCE - 2001 (138) E.L.T. 94 (T) = 2002 (48) R.L.T. 221. The departmental representative relies heavily on what the Commissioner has said. The ratio of the decision in Ballarpur Industries is that in cases where the exempted final product is not sold, the provisions of sub-rule (1) of Rule 57CC will not apply because that cannot be given effect to; the rule requires the manufacturer to pay 8% of the price charged by him for the sale of such goods. Although this decision was not cited before the Commissioner, the specific point which forms the ratio of this decision was urged before him and he has not dealt with it, merely saying that the provisions of rules are clear. The departmental representative is not able to say why the ratio of this decision should not apply. That ratio will have to be applied."

?7. We find that that the provisions of the Rule 6 (3)(b) are similar to the provisions of earlier Rule 57CC of Cenvat Excise Rules and while interpreting the earlier rules, the Tribunal held that where the exempted final products are not sold, the manufacturer is not liable to pay 8% of the price charged by him under Rule 57CC of Cenvat Excise Rules. In view of the above decision of the Tribunal and the goods manufactured on job-work basis and were cleared under the Notification No. 214/86-CE, it cannot be said that the appellants, who is a job worker, sold the goods to the principal manufacturer in absence of sale, the ratio of the decision is fully applicable to the facts of the present case. Therefore, demand cannot be made on the ground that the appellants had cleared the goods without payment of duty on which credit was taken.

7A.We further find that the appellants had already? reversed the credit taken on the inputs, which were used in the manufacture of the goods which were cleared after job-work under notification, therefore, no further demand can be raised by 8% as provided under Rule. In the case of Jalpack India Ltd.(supra), the Tribunal set aside the demand raised on the similar ground where the credit taken by the appellants on the inputs used in the manufacture of exempted job work goods were reversed at the time of clearance. In view of the decision of the Tribunal, the Revenue is not disputing the fact that the intermediate products manufactured by the appellants are further used in the manufacture of pouches, which were cleared without payment of duty. Therefore, the demand is not sustainable and is set aside. The appeal is allowed..

There are other various judgments wherein similar issues has been decided in favour of the assesseee some of the judgment and relevant paras are extracted below:

2003 (161) E.L.T. 880 (Tri.  Mumbai) INDIAN SMELTING & REFINING CO. LTD.

Versus COMMISSIONER OF CENTRAL EXCISE, MUMBAI

2.Counsel for the appellant relies upon the decision? of this Tribunal in Ballarpur Industries v. CCE - 2001 (138) E.L.T. 94 (T) = 2002 (48) R.L.T. 221. The departmental representative relies heavily on what the Commissioner has said. The ratio of the decision in Ballarpur Industries is that in cases where the exempted final product is not sold, the provisions of sub-rule (1) of Rule 57CC will not apply because that cannot be given effect to; the rule requires the manufacturer to pay 8% of the price charged by him for the sale of such goods. Although this decision was not cited before the Commissioner, the specific point which forms the ratio of this decision was urged before him and he has not dealt with it, merely saying that the provisions of rules are clear. The departmental representative is not able to say why the ratio of this decision should not apply. That ratio will have to be applied.

2001 (135) E.L.T. 657 (Tri. - Del.) JINDAL POLYMERS Versus COMMISSIONER OF CENTRAL EXCISE, MEERUT-III

5.In both the Notifications viz. 214/86 and 217/86,? the requirement is that the final products should be those on which duty of excise is leviable. In the context of Bajaj Tempo, the Tribunal has extended the chain of credit up to the stage of final products viz. motor vehicles which are cleared on payment of duty. Applying the ratio of the Bajaj Tempo case, the chain of credit in the present case is to be extended up to the stage of polyester/polymer filament yarn cleared on payment of duty. The learned SDR has not been able to point out any fundamental difference between Notification 217/86 (which was under consideration in the Bajaj Tempo case and Notification 214/86, which is relevant in the present case) so as to persuade us to take a view that Bajaj Tempo decision is distinguishable and, therefore, does not require to be followed. On an analysis of the Bajaj Tempo decision, we are of the view that the principle laid down therein would be equally applicable to the facts of the present case. Hence, following the ratio of the above decision cited supra, we hold that the appellants are entitled to Modvat credit of the amount disallowed by the adjudicating authority, set aside the denial of credit and the imposition of penalty. The impugned order is set aside and the appeal allowed with consequential relief.

In the above judgments, it is was held that in case of input used in the job work goods manufactured and cleared under Notification 214/86-CE dated 25/3/1986, neither Cenvat Credit can be denied nor demand under Rule 57 CC can be made. In view of my above discussion and settled legal position, the impugned order is set aside and appeal of the appellant is allowed.

(Operative part pronounced in court)

Ramesh Nair Member (Judicial)

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