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CX – In case of job work under Notfn 214/86-CE, credit cannot be denied on ground that goods manufactured under said Notfn is exempted: CESTAT

2019-TIOL-2321-CESTAT-AHM

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH, AHMEDABAD
REGIONAL BENCH
COURT NO. III

Excise Appeal No.11169 of 2018

Arising out of Order-in-Appeal No OIA-CCESA-SRT-APPEALS-PS-422-2017-18, Dated: 08.01.2018
Passed by Commissioner (Appeal) of Central Excise and ST, Surat

Date of Hearing: 18.4.2019
Date of Decision: 18.4.2019

M/s WELSPUN INDIA LTD

Vs

COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX
SURAT

Appellant Rep by: Shri S Suriyanarayanan, Adv.
Respondent Rep by:
 Shri Amit Mishra, Joint Commissioner (AR)

CORAM: Ramesh Nair, Member (J)

CX – The limited issue to be decided is whether the assessee is entitled for Cenvat credit in respect of furnace oil which is used in manufacture of job work goods under Notfn 214/86-CE – The lower authorities have denied credit on the ground that since the job work goods is exempted from payment of duty, credit in respect of furnace oil is not admissible – From the Rule 3(1) of Cenvat Credit Rules, it can be seen that the credit is allowed in respect of inputs used in manufacture of goods under Notfn 214/86-CE despite the fact that job worker is not supposed to pay the duty when the goods are manufactured under said Notfn – This is for the reason that goods manufactured under said Notfn is not otherwise exempted as the notification contained a condition that the job work goods subsequently shall be used in further manufacture by principal and the same would be cleared on payment of duty – Therefore, Notfn 214/86 has practically not given any exemption to any goods – Moreover, in assessee’s own case, the same issue has been dealt wherein the demand of 10% value of the same goods was dropped on the ground that goods manufactured under said Notfn 214/86-CE is exempted – There is no doubt that in case the goods manufactured under job work under Notfn 214/86-CE, credit cannot be denied on the ground that goods manufactured under said Notfn is exempted – Accordingly, the impugned order is set-aside: CESTAT

Appeal allowed

Case laws cited:

Welspun India Limited vs. CCE, Daman – 2009(248) ELT 898 (Tri. Ahmd.)…Para 2

CCE vs. Gujarat Narmada Fertilizers Company Limited – 2009-TIOL-96-SC-CX…Para 3

CCE, Vadodara vs. Sunder Metal Pvt. Limited in Tax Appeal No. 876 of 2006 and. dated 08.11.2012…Para 3

FINAL ORDER NO. A/10711/2019

Per: Ramesh Nair:

The issue involved is whether the appellant are liable to pay 10% of the value of the goods in a case where furnace oil is used in the manufacture of final product on job work basis under Notification No. 214/86-CE dated 25.03.1986.

2. Shri S. Suriyanarayanan, Ld. Counsel appearing on behalf of the appellant at the outset submits that the issue is already decided in favour of the appellant in their own case reported at Welspun India Limited vs. CCE, Daman – 2009(248) ELT 898 (Tri. Ahmd.). Accordingly, the credit is admissible even though the input is used in the manufacture of job work goods.

3. Shri Amit Mishra, Ld. Joint Commissioner (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order. He relied on the decision of Hon’ble Supreme Court in the case of CCE vs. Gujarat Narmada Fertilizers Company Limited – 2009 (240) ELT 661 (SC) = 2009-TIOL-96-SC-CX and the decision in the case of CCE, Vadodara vs. Sunder Metal Pvt. Limited in Tax Appeal No. 876 of 2006 and. dated 08.11.2012.

4. Heard both sides and perused the record. The limited issue to be decided by me is whether the appellant is entitled for Cenvat credit in respect of furnace oil which is used in the manufacture of job work goods under Notification No. 214/86-CE dated 25.03.1986. The lower authorities have denied credit on the ground that since the job work goods is exempted from payment of duty, credit in respect of furnace oil is not admissible. I find that in respect of goods manufactured under Notification No. 214/86-CE there is specific provision under Rule 3(1) of Cenvat Credit Rules which are reproduced as under:-

Sub-Rule (1) of Rule 3 of Cenvat Credit Rules, 2002 –

(1) A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of –

“including the said duties paid on any input 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 in the Ministry of Finance (Department of Revenue), No. 214/86- Central Excise, dated the 25th March, 1986, published vide number G.S.R. 547 (E), dated the 25th March, 1986, and received by the manufacturer for use in, or in relation to, the manufacture of final product, on or after the first day of March, 2002.”

5. From the above Rule, it can be seen that the credit is allowed in respect of inputs used in the manufacture of goods under Notification No. 214/86-CE despite the fact that job worker is not supposed to pay the duty when the goods are manufactured under Notification No. 214/86-CE. This is for the reason that goods manufactured under Notification No. 214/86-CE is not otherwise exempted as the notification contained a condition that the job work goods subsequently shall be used in the further manufacture by the principal and the same would be cleared on payment of duty. Therefore, Notification No. 214/86 has practically not given any exemption to any goods. Moreover, in the appellant’s own case cited supra, the same issue has been dealt wherein the demand of 10% value of the same goods was dropped on the ground that goods manufactured under Notification No. 214/86-CE is exempted. As regards the judgment relied on by the ld. AR, I find that none of the judgment has dealt to the situation where the goods were manufactured under Notification No. 214/86-CE dated 25.03.1986.

6. As per my above discussion, there is no doubt that in case the goods manufactured under job work under Notification No. 214/86-CE, credit cannot be denied on the ground that goods manufactured under Notification No. 214/86-CE is exempted. Accordingly, the impugned order is set-aside and the appeal is allowed.

(Dictated and pronounced in the open court)

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