CX - Cenvatted Moulds cleared under Rule 57S(8) to Job worker without payment of duty - Demand of duty on ground that consignor cannot be treated as job worker as no raw material was supplied by Principal manufacturer - No error in order of Tribunal setting aside demand: HC
By TIOL News Service
CHENNAI, SEPT 22, 2014: THE respondent/assessee is engaged in the manufacture of washing machines. They availed credit of duty paid on capital goods. The assessee had sent their moulds to their consignees/job workers for the manufacture of washing machine parts by using the moulds supplied by the assessee to the said job worker. The job workers, on their part, used the moulds and dies for manufacture of the parts. The raw material, for manufacture of those parts, was, however, procured by the job worker and after the parts were manufactured, they were cleared and supplied to the assessee on payment of Central Excise duty, payable on those goods. The amortised value of moulds was also included in the value of parts. The assessee in this case, while sending the moulds and dies to the job workers invoked the provision of Rule 57S( 8) of Central Excise Rules, 1944 and at the time of removal of moulds and dies, the assessee took permission from the Commissioner, removed the moulds and dies without payment of duty and sent to the job workers for the purpose of production of goods on their behalf and in accordance with the specifications.
The Department was of the view that the job workers/consignees were buying the raw materials on their own and manufactured the parts of the washing machine with the help of the moulds and dies supplied by the assessee and therefore, they are the principal manufacturers and the assessee also is a principal manufacturer. The removal of moulds and dies from one principal manufacturer to another principal manufacturer should be done only after reversing the credit taken on the moulds and dies by the assessee.
The revenue is in appeal against the order of Tribunal setting aside the demand.
After hearing both sides, the High Court held:
The removal of moulds and dies without payment of duty is in relation to only moulds and dies and not with respect of any other capital goods. The provision does not impose any condition that the raw materials also should be supplied by the assessee along with the moulds and dies. So long as the permission is granted by the Commissioner for removal of moulds and dies without payment of duty to the job worker, the question of deeming it as an improper clearance does not arise.
In the case of Monica Electronics vs CCE reported in 2000 (123) ELT 1047, while interpreting clause (8) of Rule 57S, the Tribunal laid emphasis on the nonobstante clause and held that the expression 'job worker' in relation to Exemption Notification No.214 of 1986 similar to that of Notification No.119 of 1975 as in the case of Prestige Engineering (India) Ltd. vs Collector Of Central Excise, Meerut reported - 2002-TIOL-151-SC-CX has no basis for denying the benefit of 'job worker' in terms of Rule 57S(8). It was clearly held that the definition of 'job worker' is in relation to a particular notification and not in relation to the provisions of the Modvat Rules, more particularly, Rule 57S(8).
The distinction made by the Tribunal, on facts, as against the decision in the case of Prestige Engineering (India) Ltd. vs Collector Of Central Excise, Meerut reported in - 2002-TIOL-151-SC-CX , is justified as the decision in the case of Prestige Engineering (India) Ltd. vs Collector Of Central Excise, Meerut reported in - 2002-TIOL-151-SC-CX, the emphasis laid by the Supreme Court is that the Explanation appended to notification on the expression 'job worker' is in relation to the said notification and not otherwise. It, therefore, means, that the term 'job worker' in respect of one notification and the term 'job worker' in relation to Rule 57S(8) should be understood in the context of the provisions of the Modvat Rules.
The Tribunal is justified in accepting this plea of the assessee. Further, the decision of the Tribunal in the case of Monica Electronics vs CCE reported in 2000 (123) ELT 1047, followed by the Tribunal in the present case, has been accepted by the Department and therefore, the principal laid down in the decision of the Supreme Court reported in - 2006-TIOL-130-SC-CX (Boving Fouress Ltd. V. Commissioner of Central Excise, Chennai) that the Revenue cannot agitate on the same question, which has already been accepted by them.
(See 2014-TIOL-1629-HC-MAD-CX)
