M/S S B Engineers vs Commissioner Of Central Excise &

(Arising out of Order-In-Appeal-No.: VAD-EXCUS-002-APP-378-14-15 Dated 03.09.2014 Passed by Commissioner (Appeals) Central Excise, & Customs & Service Tax, Vadodara )

M/s S B Engineers : Appellant (s) Vs.

Commissioner Of Central Excise & : Respondent (s)

Customs Service Tax - Vadodara-ii

Represented by :

For Appellant (s) : S.R. Dixit, Advocate For Respondent (s) : Shri J. Nagori, Authorised Representative

For approval and signature :

Mr. H.K. Thakur, Honble Member (Technical)

1

Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

No

2

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

No

3

Whether their Lordships wish to see the fair copy of the Order?

Seen

4

Whether Order is to be circulated to the Departmental authorities?

Yes

CORAM :

Mr. H.K. Thakur, Honble Member (Technical)

Date of Hearing / Decision : 20.07.2015

ORDER No. A/11053/2015 Dated 20.07.2015

Per : Mr. H.K. Thakur;

This appeal has been filed by the appellant against OIA No. VAD-EXCUS-002-APP-378-14-15 dated 03.09.2014 under which first appellate authority upheld OIO dated 01.10.2013 passed by the adjudicating authority.

2. Shri S.R. Dixit (Advocate) appearing on behalf of the appellant argued that issue involved in these proceedings is whether appellant is required to pay an amount equivalent to 8% or 6% with respect to exempted activities under taken by the job worker which are exempted under Notification No. 8/2005 dated 01.03.2005. Learned Advocate relied upon the following case laws in support of his argument that this issue is now settled:-

(i) Commissioner of Central Excise, Vadodra- I vs. M/s Vidya Wires Pvt. Ltd. - [2014-TIOL-1800-CESTAT-AHM]

(ii) JBF Industries vs. C.C.E, VAPI  [2014(34) S.T.R. 345 (Tri.- AHMD.)]

3. Shri J. Nagori (AR) appeared on behalf of the Revenue and strongly defended the order passed by the first appellate authority.

4. Heard both sides and perused the case records. The issue involved is whether appellant is required to pay an amount at the rate of 8% or 6% under Rule 6 of Cenvat credit Rules 2004 When goods/services rendered by a job worker are exempted. It has been correctly argued by the learned advocate of the appellant that issue stands settled in view of ordered passed by this bench in the case of JBF  Industries vs. C.C.E. & S.T., VAPI (Supra), after relying upon larger bench judgment in the case of sterlite Industries Ltd. vs. cmmr. [2005 (183) E.L.T. 353 (Tribunal  LB)] Paras 6.1 and 6.3 of ordered dated 11.02.2014 passed by this bench in the case of JBF vs. C.C.E. & S.T, VAPI (Supra) are relevant and are reproduced blow-

 6.1 The issue involved in the present proceedings is whether the Cenvat credit of input services taken by the appellant and used by them in the manufacture of job-worked goods (exempt under Notification No. 214/86-C.E.) is admissible to the appellant or not in view of the provisions contained in Rule 6(1) of the Cenvat Credit Rules, 2004. The demand has been confirmed against the appellant on the grounds that Service Tax credit proportionate to the services used in the manufacture of exempted goods under Notification No. 214/86-C.E., dated 25.03.1986, is not admissible. From the case laws relied upon by the appellant, it is observed that the issue is no more res integra and has been decided by the Larger Bench in the case of sterlite Industries (I) Limited vs. CCE, Pune (supra) by holding that credit availed by the job worker cannot be denied where inputs were used in the manufacture of goods which were cleared without payment of duty under Notification No. 217/86-C.E. In this judgment the Larger Bench approved the law laid down by CESTAT in the case of Jindal Polymers [2001(43) RLT 680 (Tri.-Del) = 2001 (135) E.L.T.

657 (Tri.-Del)]. We find that in the mater of Jindal Polymers (supra), a division of Jindal Polyester Ltd., were engaged in the manufacture of polyester/polymer chips falling under Chapter 39 on job work basis or Jindal Polyester Ltd. They received main inputs viz. DMT and MEG from Jindal Polyester Ltd. for the purpose of processing/job work in terms of Notification 214/86-C.E., dated 25.03.1986, on which no credit was taken by them. They also procured certain other inputs viz. furnace oil, ammonia, titanium oxide, etc., for use in processing of inputs received from M/s Jindal Polyester and availed credit on the above inputs. The processed, goods i.e. polyester/polymer chips were cleared without payment of duty under the said Notification M/s. Jindal Polyester Ltd. The Department was of the view that credit was not admissible since Rule 57C of the Central Excise rules provided that Movat credit of duty paid on inputs used in the manufacture of final products cleared at nil rate of duty is not admissible if the provisions of Rule 57CC ibid are not followed. Following the ratio of Bajaj Tempo Case [1994 (69) E.L.T.

122], the Tribunal held in this case that the appellants were entitled to Modvat credit of duty paid on inputs procured on their own account & used in the manufacture of job-worked goods exempted under Notification Number 214/86-C.E. This decision of the Tribunal has been affirmed by the Larger Bench decision in the matter of Sterlite Industries (I) Limited vs. C.C.E., Pune [2005(68) RLT 25 (CESTAT-LB) = 2005 (183) E.L.T. 353 (Tribunal-LB)]. Departmental appeal filed against this order of the Larger Bench has been rejected by the Honble Bombay High Court as reported in 2009 (244) E.L.T. (A89). Further, in the cases of Polyca Industries vs. C.C.E., REPORTED AS 2010 (19) S.T.R. 585 (Tri.-Ahmd.) and Laskoona Reactions vs. C.C.E., Ahmedabad-I (Final Order No. A/497-498/WBZ/AHD/2010, dated 13.05.2010), The Tribunal has held that Cenvat credit of input services was admissible to the job worker clearing goods to principal manufacturer under Notification Number 214/86-C.E. In view of the above, we hold that the provisions of Rule 6(1) of the Cenvat Credit Rules, 2004 cannot be invoked for denying Cenvat credit of input services used by the appellant factory for manufacture of job-worked goods under Notification No. 214/86-C.E.

Though the Larger Bench judgment in the case of Sterlite Industries (I) Ltd. was delivered with respect to Rule 57C of the Central Excise Rules, 1944, but the ratio of the same has been held to be applicable to the Service Tax credit availed by the job worker under Notification No. 214/86-C.E. as per the decisions of this Bench in the case of Polycab Industries vs. C.C.E, Daman (supra), and Laakoonaa Reactions vs. C.C.E., Ahmedabad-I (supra).

6.3 The Revenue has also argued that the production or processing of raw materials, which amounted to manufacture in terms of Section 2(f) of the Central Excise Act, 1944, was an exempted or non-taxable service during the material period as per Rule 2(e) of the Cenvat Credit Rules, 2004, and hence Cenvat Credit of input services was not available to the appellant for rendering non-taxable or exempted output service viz. production or processing of raw materials amounting to manufacture. In this context we find that the job work activity of the appellant is amounting to manufacture and is not one of providing any service. The appellant factory cannot be both a manufacturer and a service provider at the same time in relation to a particular activity. It is settled proposition in central Excise matters that a job worker is a manufacturer and hence the appellant factory cannot be treated as a service provider rendering exempted/non-taxable service for the manufacturing activity. Therefore, there is no force in the Revenues contention that the appellant had rendered exempted/non-taxable service to its sister concern located at Athola.

5. In view of the above settled proposition appeal filed by the appellant is allowed with consequential relief, if any.

(Operative part of the order pronounced in the Court)

(H.K. Thakur) Member (Technical) VM

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