Central Excise Duty not Payable on Intermediate Products, used Captively in Manufacture of Exempted Final Products: CESTAT [Read Order]

Central Excise Duty - Payable - Intermediate Products - Captively - Manufacture - Final Products - CESTAT - Taxscan

The Ahmedabad Bench of Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that central Excise Duty not payable on intermediate products, used captively in manufacture of exempted final products.

The appellant, Spray King Agro Equipment Pvt Ltd is engaged in the manufacture of Brass parts of agricultural products. They are also manufacturing intermediate products, such as Brass Casted Rods at their own factory and also getting it manufactured at the place of Job worker. As per the Notification No.03/2005-CE, Brass parts of Agriculture Products are exempted from payment of Central Excise duty. They used Brass Casted Rods captively. On this captive consumption of the Brass Casted Rods which are used for the manufacture of final product, the appellant claimed exemption under Notification No. 67/95-C.E.,Notification 83/94-CE and 84/94 – CE.

The appellants were issued a show-cause notice proposing a demand for an excise duty of Rs. 11,55,62,312 on intermediate goods namely;casted brass rods manufactured by them and manufactured on job work basis. The demand of duty was confirmed by the Commissioner and penalty equivalent to the duty under Section 11AC was also imposed. In addition, personal penalty of Rs 5,00,000/- was also imposed on Sri Hiteh P. Dudhagra, Director, of the appellant-Company. Aggrieved, assessee filed appeal before CESTAT.

Mr. P.D Rachchh, counsel for the appellant submitted that they have not availed the Cenvat Credit under Cenvat Credit Rules 2004, therefore they discharged obligation under Rule 6 of the CCR, 2004 and eligible for exemption for intermediate goods namely; Brass Cast Rods manufactured in their factory and used captively for manufacture of parts of Agriculture Equipment’s in terms of clause (vi) of Notification No. 67/95-CE.

The counsel for the appellant further submitted that the goods manufactured on Job Work basis is exempted from duty of excise under Notification No. 83/94-C.E. and applies to intermediate goods. The Notification No. 84/94-C.E. applies to waste and scrap sent to Job Workers for the manufacture of intermediate goods. Hence, the confirmation of demand of Rs. 3,94,46,239/- on intermediate goods got manufactured on Job Work basis is also liable to be quashed.

The Tribunal observed that as per the Notification No. 67/95-the exemption is not available to the intermediate goods used in the exempted goods, but the exception was provided even if the final product is exempted,for that the assessee discharged the obligation prescribed in Rule 6 of Cenvat Credit Rules, then in spite of the final product is exempted, the exemption on the intermediate goods is available in terms of the aforesaid notification.

The Coram of Mr. Ramesh Nair, JM and Mr. P.Anjani Kumar, AM has held that “the appellant during the impugned period not registered with the Central Excise Department, hence, has not availed the Cenvat credit in respect of any of the inputs used either in the final product or in the intermediate product i.e.,Brass Casted Rods. Therefore, the condition of sub-rule (1) of Rule 6 stands complied with. The finding of the adjudicating authority as regard the applicability of above notification is misleading and absolutely incorrect. We are therefore of the considered view that the appellant has discharged the obligation under Rule 6(1) accordingly they are legally entitled for the exemption Notification No. 67/95-C.E., dated 16-3-1995 in respect of their intermediate product i.e., Brass Casted Rods”.

Mr. T.G Rathod, Additional Commissioner appeared for the respondent.

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