Commissioner, Customs, Central Excise And Service Tax, Ujjain vs M/S Uflex Limited

The present appeal is filed claiming that the following substantial questions of law arising out of order passed on 7.10.2016 by the Customs, Excise and

Service Tax Appellate Tribunal (for Short ""the Tribunal"").

“1. Whether the learned CESTAT was justified in holding that the said goods manufactured on job work basis on which no duty was paid by the

respondent are not exempted goods and accordingly holding that the provisions of Rule 6(1) of the Cenvat Credit Rules are not applicable?

Whether in the facts andcircumstances of the case, the learned CESTAT has rightly considered the scheme of CENVET Credit Rules, 2004 and its

allied provisions of notification No. 214/86?

Whether the order of the learnedCESTAT is correct on facts and provisions of law?

Whether in the facts and circumstances of the case, the order passed by the learned CESTAT is justified and in accordance with the principles of

jurisprudence?

Whether in the facts and circumstances of the case, the learned CESTAT has rightly considered the effect of various judicial pronouncement and

government circulars in the factual matrix of the present case?

The said order arises out of the fact that the assessee manufacture goods on job work on which excise duty is payable as also goods which are

exempted from excise duty under notification No.214/86. The assessee takes credit on raw materials used in the manufacture of polyester chips as

also on input services. One item of such input service is service of goods Transport Agency for transporting the polyester chips to the factory of their

principal. The period of dispute is April, 2009 to February, 2010.

The Additional Commissioner of Customs confirmed the duty demanded for an aggregate amount of Rs. 10,62,325/- and also imposed 100% penalty

under Rule 15 of the Cenvat Credit Rules. The appeal against the said order of assessment was dismissed by Commissioner (Appeals) on 17/01/2012.

It was in further appeal, the Tribunal accepted the appeal and set-aside the demand in respect of credit of outward transportation, and that the matter

was remanded back in view of the amendment carried out in the definition of “Input Servicesâ€. The Tribunal relied upon the judgment of Hon'ble

P&H High Court in the case of CCE vs Happy Forgings Ltd. 2011 (265) ELT 197 (P&H) and JBF Industries vs CCE & ST Vapi 2014 (34) STR 345

(Tri. Amd.). The Tribunal recorded the following findings :

“I have heard the Ld. Counsel for both sides and perused the records.

Obligations of a manufacturer of both dutiable and exempted goods is contained in rule 6 of the Cenvat Credit Rules, 2004. Sub-rule (1) of the said

Rule mandates that Cenvat credit shall not be allowed on such quantity of input, which is used in the manufacture of exempted goods. The issue

involved in this case for consideration is, as to whether, the polyester chips supplied to the sister concern on job work basis should be considered as

exempted goods.

Supply of polyester chips on job work basis is governed under the provisions of Notification No. 214/1986 dated 25.03.1986, where under the

intermediary goods are exempted, subject to the condition that the said goods shall be used by the principal manufacturer for manufacture of other

goods, on which the duty liability shall be discharged. Since polyester chips in the case in hand is not exempted in terms of Rule 2(d) ibid and the said

intermediate goods were used for manufacture of polyester films, which attracts payment of duty and the principal manufacturer has removed the said

goods on payment of appropriate duty, in my opinion, the embargo created in sub-Rule (1) of Rule 6 shall not be applicable for not extending the

cenvat benefit on the input used for manufacture of polyester chips. I also find that decision cited by the Ld. Advocate squarely covers the case.

Therefore, I do not find any merits in the impugned order and allow the appeal in favour of the appellant.â€​

In Escorts Ltd. Vs. Commissioner of Central Excise, Delhi [(2004) 7 SCC 214], it is observed:-

“8. It is to be seen that the whole purpose of the Notification and the Rules is to streamline the process of payment of duty and to prevent the

cascading effect if duty is levied both on the inputs and the finished goods. Rule 57D (2), which has been extracted hereinabove, shows that in the

manufacture of a final product an intermediate product may also come into existence. Thus in cases where intermediate product comes into existence,

even though no duty has been paid on the intermediate product as it is exempted from whole of the duty or is chargeable to Nil rate of duty, credit

would still be allowed so long as duty is paid on the final product. â€​

We do not find any error in the said findings recorded by the Tribunal which is based upon decisions in Happy Forgings Ltd. (supra) and JBF

Industries (supra). The Tribunal has rightly found that there is no difference between 'input' and 'input services' credit as the issue is same in clear

terms of notification No.214/86, therefore, denial of Commissioner, Customs, Central Excise and Service Tax, Ujjain Vs. M/s Uflex Limited credit

cannot be upheld.

We find that the findings recorded by the Tribunal are the finding of facts. Therefore, we do not find any substantial question of law for consideration.

The Appeal is, therefore, dismissed.