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The goods manufactured on job work basis is exempted under notification 214/86 on the ground that the excise duty is charged on the full value of the final product including the value of job work goods, the job work goods cannot be said to be exempted goods.
Facts
The Appellant, a job worker availed CENVAT credit on the inputs used in the manufacture of goods on job work basis. Exemption of excise duty was availed under Notification No. 214/86-CE as the principal supplier had undertaken to discharge excise duty either on the job work goods or on the final product in which job work intermediate goods is used. The adjudicating authority confirmed the demand @ 10% of the value of the goods manufactured for reversal of credit in terms of Rule 6 of the CENVAT Credit Rules, 2004 on the ground that exempted goods were manufactured.
Held
The Tribunal relying upon various judicial pronouncements held that Notification No. 214/86 provides that the principal supplier of raw material undertakes to discharge excise duty either on the job work goods or on the final product in which the job work goods is used. Accordingly, it cannot be said that the job work goods are exempted from payment of excise duty. Even if any duty is charged at the job worker’s end the same shall be available as CENVAT credit to the principal supplier and only for procedural convenience, Notification was issued. Therefore, Rule 6(3)(b) which is applicable only on the clearance of exempted goods shall not apply and accordingly the demand is set aside.
