Decided on July 27,2015

Dhana Singh Synthetics Pvt. Ltd. Appellant
Commissioners Of Central Excise, Customs And Service Tax -Vapi Respondents

Referred Judgements :-



P.K.DAS - (1.)THE relevant facts of the case, in brief, are that the appellants were engaged in the manufacture of Grey and Processed Manmade Fabrics and holding Central Excise Registration Certificate.
(2.)In the year 2001 -02 and 2002 -03, the appellants received fabrics for processing from two different parties for job work, accompanied with challans (i.e., Annexure II) issued under Rule 57F(4) of the erstwhile Central Excise Rules, 1944. Rule 57F(4) is corresponding to provision of Rule 4(5)(a) of Cenvat Credit Rules, 2002. The appellants cleared the goods after processing to the supplier of the material under the cover of the Central Excise challans. A show cause notice dtd. 25.10.2004 was issued to the appellant proposing demand of Central Excise duty amounting to Rs. 34,12,152/ - on the ground that they did not pay the Central Excise duty on the clearance of fabrics manufactured by them on job work basis. It has been alleged that the fabrics manufactured by the appellant on job work basis during the relevant period were not exempted by Notification No. 214/86 -CE dtd. 25.3.1986. The Adjudicating Authority dropped the proceeding initiated under show cause notice dtd. 25.10.2004. Revenue filed appeal before the Commissioner (Appeals). By the impugned Order, Commissioner (Appeals) allowed the appeal filed by the Revenue and set aside the adjudication Order. Hence, the appellant filed this appeal before the Tribunal. After hearing both the sides and on perusal of the records, we find there is no dispute on the facts that the appellant received the fabrics under the cover of Central Excise Challans issued under Rule 57F(4) of the erstwhile Central Excise Rules and corresponding Rule of Central Excise Rules, 2012. The appellant after due process of fabrics retuned the goods to the raw -material supplier, who used in the manufacture of finished products and cleared on payment of duty. For the proper appreciation of the case, the relevant portion of the findings of the Adjudicating Authority is reproduced below:
"The job -worker has stated in its defence reply that they did not receive the inputs for job work under Notification No. 214/86 -CE dated 25/3/86 but received under Annexure II Challans issued under Cenvat Rules. In the show cause notice also, this fact has not denied. On mere reading of Rule 4(5)(a) of Cenvat Credit Rules, 2002/cenvat Credit Rules, 2004, I am convinced that the job -worker was entitled to receive inputs/semi -processed goods for job work and after completion of job work was permitted to remove the processed/semi -processed without payment of duty under Annexure II Challan to the principal manufacturer. In the old Rule 57F(6) of Central Excise Rules, 1944, there was a provision to debit an amount equal to 10% of the value of inputs removed to job -worker. But the same was done away subsequently and no such condition is stipulated in new Cenvat Credit Rules. The reversal of Credit by the manufacturer is envisaged under the new Rule 4(5)(a) only when the inputs/semi -finished goods so sent to the job worker are not received back within 180b days by the manufacturer. Moreover, the manufacturer is allowed to take the Cenvat Credit again when the inputs/Capital Goods are received back in his factory. From the reading of whole text to Rule 4(5)(a), it is clear that the job workers are not required to pay any duty while sending the processed/semi processed goods to the principal manufacturer. In the Show Cause Notice, no such allegation relating to non -receipt of processed man -made fabrics from the job -worker or non payment of Central Excise duty on the ultimate finished goods by the principal manufacture is made."

(3.)THE Commissioner (Appeals) observed that the benefit of Notification No. 214/86 -CE dtd. 25.3.1986 as amended was not available to the appellant during the relevant period. It has been observed that the provisions of Rule 57F(4) of the erstwhile Rule would not applicable in Cenvat Credit Rule 2002. We find that CBEC vide Circular No. 306/22/97 -CX dtd. 30.3.1997 clarified that under the provisions of Rule 57F (4), a manufacturer can get job work done on the inputs or on partially processed inputs in terms of provisions of Rule 57F(4) of the erstwhile Rule. In such cases, duty liability is required to be discharged by manufacturer and not by the job worker. Accordingly, the job worker is not eligible to avail credit in such situation. Larger Bench of the Tribunal in the case of M/s. Sterlite Industries (I) Ltd. v. CCE, Pune : 2005(183)ELT. 353 (Tri.LB) held that duty on inputs used in the manufacture of final products cleared without payment of duty for further utilisation in manufacture of final product, which were cleared on payment of duty by principal manufacturer, on job work basis not hit by provisions of Rule 57F of erstwhile Rule. In the case of M. Text & D K Processors Pvt. Ltd. v. CCE, Jaipur : 2001(136)ELT. 73 (Tri.Del.) the Tribunal held that partially processed fabrics returned by the job worker to the principal manufacturer after heat setting and stentering under Rule 57F(4) not required to pay duty in the hands of job worker even if heat setting and stentering amount to manufacture in terms of Chapter Note 4 of Chapter 55 of Central Excise Tariff Act 1985. The said decision was upheld by the Hon'ble Supreme Court as reported in, 2002(146)ELT. A309. We find that Rule 57F(4) of the erstwhile Rule corresponding to Rule F(4)(5)(a) of the Cenvat Credit Rule 2002, permits the manufacturer to clear the goods to job worker without payment of duty for processing. There is no dispute that the job -work materials were used in manufacture of finished goods by the principal manufacturer, who cleared the goods on payment of duty. Thus, it is the case of Revenue neutral in so far as the payment of duty by the job -worker will enable the principal manufacturer to avail cenvat credit. Hence, we find that the order passed by the Adjudicating authority is legal and proper.

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