Recent Supreme Court Judgements
CENTRAL Excise - SSI Exemption - Exemption for own goods and duty payment with CENVAT Credit for branded goods - Permissible
The issue before the Supreme Court was whether availing the benefit of MODVAT /CENVAT credit in respect of branded goods of third parties manufactured by the assessees on job work basis, disentitles them from availing the benefit of the SSI Notifications?
The Supreme Court held that clearances bearing the brand name or trade name of third parties are concerned, they are kept outside the scheme inasmuch as:
(a) they are not to be included for the purposes of determining the aggregate value of the clearances for home consumption; and
(b) such products bearing brand names or trade names of third parties, even if manufactured by the SSI Unit, are not eligible for any exemption and excise duty thereupon has to be paid.
Once we understand the scheme of the Notifications in this perspective, which according to us is the only manner in which it has to be understood, it becomes apparent that so far as manufacture of branded goods of third party on job work basis by the SSI Unit is concerned, they are to be dealt with differently in the sense that they do not come within the ambit of exemption on which normally excise duty, as per the provisions of the Act, is payable.
As a sequitur, it also follows that once excise duty is paid by the manufacturer on such branded goods manufactured, the brand name whereof belongs to another person, on job work basis, the SSI Unit would be entitled to CENVAT/ MODVAT credit on the inputs which were used for manufacture of such goods as on those inputs also excise duty was paid. To put it otherwise, these branded goods manufactured by the SSI Units meant for third parties are regulated by the normal provisions of excise law and will have no bearing or relevance insofar as availing the benefit of the SSI exemption notifications in respect of its own products manufactured by the SSI Units is concerned .
Please see Breaking News and Commissioner of Central Excise, Chennai Vs Nebulae Health Care Ltd -
Central Excise - EOU - Concessional rate to goods cleared to DTA, when manufactured from indigenous raw material - Imported wax used in manufacture of cotton yarn - not eligible for exemption
As per Notification No. 8/97-CE dated 1-3-1997, there is a concessional rate of duty for clearances of goods from EOUs to DTA, if the goods are manufactured by the EOU using indigenous raw material only. In this case, imported wax was used in the manufacture of cotton yarn. The Commissioner found that Wax disc acted as a lubricant and facilitated processing and use in the manufacturing process and remained a temporary coat and allowed the exemption.
The Supreme Court held that a particular item, though required for a manufacturing process or participates in the said process would be treated as 'consumable', if it does not form part of end product and instead it gets substantially or totally consumed during the manufacturing process. In contrast, if any materials or goods are required for the manufacturing process, such materials or goods would be treated as the 'raw material', whether they have actually been previously manufactured or are processed or are still in a raw or natural state. The wax coating is found to be essential for lubrication of the yarn and was allowed to remain on the yarn in order to facilitate its winding on cones and its use in knitting hosiery.
The Supreme Court ruled against the assessee.
Please see Breaking News and Meridian Industries Ltd Vs Commissioner of Central Excise -
Customs - Conversion of free shipping bills into drawback shipping bills - Conversion permissible only when claim for duty drawback was beyond the control of the exporter - Drawback on AIR can be considered without converting the Shipping Bill
The Commissioner (Customs) after hearing the appellant rejected the request for conversion. The CESTAT vide its final order dated 23.12.2009 set aside the order of the Commissioner(Customs) holding that the appellant was entitled to get the bills converted from free shipping bills to duty drawback bills in terms of Rule 12(1)(a) of the Rules, ingredients whereof are satisfied by the appellant.
The Department challenged the aforesaid order in the High Court in which the Department has succeeded. Exporter is before the Supreme Court.
The Supreme Court held that conversion is permissible only when the exporter is able to satisfy the Commissioner that "for reasons beyond his control" drawback was not claimed. In the instant case, a finding of fact is arrived at by the Commissioner (Customs), which has been accepted by the High Court also, that no case was made out by the appellant to suggest that claim for duty drawback was beyond the control of the appellant. It is rightly pointed out that merely because the appellant was not aware of the correct legal position would not afford any such ground that it was beyond his control.
However the Supreme Court held that drawback on All Industry Rate can be granted even without converting the shipping bill. So, the matter is remanded to the Commissioner to consider that issue afresh.
Please see Breaking News and Cargill India Pvt Ltd Vs Commissioner of Customs and Central Excise, Visakhapatnam-II -
Central Excise - Exemption Notification No. 38/2003-CE dated 30.04.2003 - Subject to process subsequent to purchase
A bare reading of the Notification makes it clear that the benefit thereof is given to those assessees when, at their hands, article of apparel or clothing accessories is subjected to any one or more of the processes, which are mentioned. However, any of such process as mentioned is to be carried out by the assessee "subsequent to purchase" of the article of apparel or clothing accessories in question.
The only question is as to whether such process was undertaken by these assessees after the purchase of material. The submission of the Department in this behalf is that since it is the assessees who had assigned the work, that is fabrication of the apparel etc. to the job workers with the supply of material as well, and the job workers after undertaking the job had supplied the said material back to the assessees, this does not amount to purchase.
As per the Supreme Court judgement in Ujagar Prints, etc. etc. vs. Union of India & Ors. - , for the purpose of arriving at the value of the jobwork at the hands of job workers, factory gate is treated as "deemed" factory gate as if the processed fabric was sold by the assessee. It cannot be disputed that the fact situation in these cases is identical where the job workers had paid the excise duty at the time of supply of these processed fabric to the respondent assessees. Once that could be treated as sale, the necessary corollary is that so far as the assessees are concerned, they had purchased processed fabric from the job workers and, therefore, would satisfy the condition of "subsequent purchase" contained in Notification No. 38/2003.
Revenue Appeal was dismissed.
Please see Commissioner of Central Excise and Service Tax Vs Aditya Birla Nuvo Ltd - 2015-TIOL-260-SC-CX.
Central Excise: Manufacture - No manufacturing process involved in by-products:
The issue involved in these appeals is regarding the confirmation of duty on the aluminium dross and aluminium ash that arises during the manufacture of die-casting of aluminium parts. The appellants herein supplied aluminium ingots to job worker and the job worker manufactured the parts, by melting this aluminium and die-casting the same. This factual position is undisputed. During the course of such die-casting of items/parts of aluminium, ash and dross arises. It is the contention of the Revenue that such aluminium ash and dross are liable for payment of excise duty.
For a future period, the CESTAT has held that during the manufacture of die-casting of aluminium parts, dross and ash emerge as by-products and, therefore, insofar as these by-products are concerned, no manufacturing process is involved and on that basis, it has held that no excise duty shall be payable thereupon. And this decision has been accepted by the Revenue.
The appeal was allowed in favour of the assessee.