By TIOL News Service

MUMBAI, JUNE 08, 2016: THE appellant is engaged in the manufacture of rubber products [CH 40.16]. They received valve bodies under the cover of Annexure II challan in terms of the job work provision envisaged in Rule 57F(3) of CER, 1944/Rule 4(5)(a) of CCR, 2004. The appellant carried out the process of bonding of rubber product manufactured by them and the processed goods were returned to the principal supplier. The appellants are discharging the excise duty on the valve of rubber product used by them plus job work charges. However, they did not include the value of the valve bodies.

SCNs were issued for inclusion of the value of valve bodies and demanding differential CE duty. The demands were confirmed along with penalties and the same were upheld by the Commissioner (A).

So, the appellant is before the CESTAT.

It is submitted that valve bodies were received by the appellant under job work challan in terms of Rule 57F(3)/Rule 4(5)(a) and as per the procedure envisaged therein the job worker is not supposed to pay any duty on the basis of declaration/undertaking filed by the principal manufacturer in terms of Notification No. 214/86-CE dated 25/3/1986. That the very same issue is squarely covered by the Supreme Court judgment in case International Auto Ltd - 2005-TIOL-81-SC-CX-LB.

The AR, while reiterating the findings of the lower authorities, added that the appellant had admittedly discharged the excise duty on the job worked goods,therefore, in terms of Supreme Court Judgment in case of Ujagar Prints Ltd - 2002-TIOL-03-SC-CX the cost of the valve bodies is includible in the assessable value.

The Bench inter alia observed -

+ appellant is manufacturer of rubber product on their own, therefore, they are required to discharge excise duty only on the product manufactured by them. The payment of duty on the rubber product is not under dispute.

+ in the present case the appellant is not paying excise duty on the machine body supplied by the principal manufacturer under job work provision as laid down under Rule 57F(3) of the Central Excise Rules, 1944 and Rule 4(5)(a) of Cenvat Credit Rules, 2004.

+ in our view the rubber product which is manufactured by the appellant are only dutiable manufacturing activity of the appellant. They are correctly discharging the duty on such rubber product.

+ as regard the dispute raised by the Revenue that the value of machines body supplied by the principal should be added in the assessable value of the job work goods, we are of the view that activity over and above of manufacturer of rubber product i.e. rubber bonding in the machine body is purely job work activity.

+ it is undisputed fact that machine bodies are supplied by the principal under Rule 57F(3) of the Central Excise Rules, 1944 and Rule 4(5)(a) of Cenvat Credit Rules, 2004 read with Notification No. 214/86-CE. The appellant also filed declaration to this effect to the Jurisdictional Asstt Commissioner in compliance of condition of the Notification No. 214/86-CE which clearly provides exemption from payment of excise duty on the job work activity subject to condition the principle supplier of raw material discharging the excise duty on their final product wherein job work goods is used. This fact is also not under dispute, in view of declaration filed by the principal supplier of the machine bodies.

+ in the given fact, we are of the view that the job work activity since clearly covered under job work provisions, no duty is required to be paid on the job work activity in terms of Notification No. 214/86-CE. Accordingly value of machine bodies supplied by the principal manufacturer need not to be added or same should not be levied with excise duty.

Noting that the issue is squarely covered by the judgment in the case of International Auto Ltd. it was held that the appellant is not required to pay duty on the machine body supplied by the principal manufacturer.

The impugned orders were set aside and the appeals were allowed.

(See 2016-TIOL-1364-CESTAT-MUM)