Whether job worker can be made liable for duty liability if procedure under Rule 4(5)(a) is followed?

PJ/CASE LAW/2014-15/2447

Case:-VANDANA DYEING PVT. LTD. Versus COMMISSIONER OF C. EX., MUMBAI-III

Citation:-2014 (307) E.L.T. 528 (Tri. - Mumbai)

Brief facts:- The appeal is directed against Order-in-Appeal No. AT/M-111/53/04, dated 30-8-2004 passed by the Commissioner of Central Excise (Appeals), Mumbai-III. Vide the impugned order, the learned appellate authority has upheld the confirmation of duty demand of Rs. 4,11,801/- along with interest thereon and also imposing equivalent amount of penalty on the appellant, M/s. Vandana Dyeing Pvt. Ltd., Mumbai.
The facts of the case are that the appellant M/s. Vandana Dyeing Pvt. Ltd., received fabrics falling under Chapters 52, 54, 55 and 58 of the Central Excise Tariff under Rule 4(5)(a) of the Cenvat Credit Rules, 2002 and undertook the process of washing and stentering, and thereafter the goods were returned to the supplier of the fabrics. However, they did not discharge any excise duty liability on the goods processed. The department was of the view that, since the process of stentering amounts to manufacture, the appellant as a job-worker, should have discharged excise duty liability on the processed fabrics and, therefore, show cause notice was issued proposing to demand duty which was confirmed by the adjudicating and appellate authorities. Hence, the appellant is before tribunal.

Appellant’s contention:- The learned counsel for the appellant submits that the Rule 4(5)(a) of the Cenvat Credit Rules, 2002 permits a manufacturer to remove inputs as such or partially processed to a job-worker for further process, repair or reconditioning or for any other purpose and to bring back the same within a period of 180 days without reversal of the credit taken on the inputs. The supplier of fabrics, in the instant case, has followed this procedure and the appellant job-worker returned the goods to the original supplier after processing. The liability to pay duty is on the supplier of the goods and not on the job-worker. Therefore, the impugned duty demand on the job-worker is not sustainable in law. He relies on the decision of this Tribunal in the appellant’s own case for the previous period, vide order No. A/276-277/11/EB/C-II, dated 23-3-2011 wherein the appeal was allowed setting aside the duty demand. He also relies on the decision of this Tribunal in the case of Trico Process Pvt. Ltd. v. Commissioner of Central Excise [2005 (189)E.L.T.126]and Akash Fashion Prints (P) Ltd. v. Commissioner of Central Excise, Ahmedabad [2009 (245)E.L.T.871]where, in similar circumstances, it was held by the Tribunal that, when the goods are removed under Rule 4(5)(a) procedure, the job-worker is not liable to discharge any excise duty liability notwithstanding the fact that the goods are not specified in Notification 214/86-C.E. The ratio of the said decisions would apply to the facts of the present case. Accordingly, he pleads for setting aside the impugned order and allowing the appeal.

Respondent’s contention:- The learned Additional Commissioner (AR) appearing for the Revenue, on the other hand, reiterates the findings of the lower appellate authority. It is his contention that under Rule 4(5)(a) goods can be moved without reversal of credit for job-work. However, the duty liability at the job-worker’s end is not exempted by Notification and since fabrics are excluded from the scope of Notification 214/86-C.E., the job-worker should have discharged duty liability. The Additional Commissioner (AR) also submits that there is no evidence available on record that the processed goods have been returned within 180 days. In these circumstances, he pleads that the impugned order is sustainable in law.

Reasoning of judgment:- As held by Tribunal in appellant’s own case and also in Trico Process Pvt. Ltd. and Akash Fashion Prints (P) Ltd. cases (supra), the liability to pay duty in respect of goods moved under Rule 4(5)(a) is on the supplier of the goods and not on the job-worker. Therefore, notwithstanding the fact that the process fabrics are not included in Notification 214/86, the job-worker is not liable to discharge excise duty liability and any liability thereon is required to be discharged by the supplier of the raw materials. Rule 4(6) of the Cenvat Credit Rules makes it abundantly clear that, if the goods are required to be cleared from the job-worker’s premises instead of being returned to the supplier, then the Commissioner can direct clearance of the goods on payment of duty from job-worker’s premises. This would also indicate that the liability to discharge duty under the provisions of Rule 4(5)(a) is on the supplier of the goods and not on the processor of the goods. In this view of the matter, they find that the impugned order is not sustainable in law and merits to be set aside. Accordingly they allow the appeal.

Decision:- Appeal allowed.

Comment:- The substance of the case is that according to rule 4(5)(a), the liability to pay duty on goods moved for job work is on supplier of goods, not on job worker. This view is also supported by the decision given in the case ofTrico Process Pvt. Ltd.and Akash Fashion Prints (P) Ltd. Therefore, job worker is not liable to pay excise duty when the procedure prescribed under Rule 4(5)(a) is followed.

Prepared by:- Monika Tak

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PJ/CASE LAW/2014-15/2447

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