JBM SUNGWOO LTD Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) APPEAL No. E/375/2001 is against an order of the Commissioner (Appeals) allowing MODVAT credits on capital goods totalling to over Rs. 1.2 crores to the appellants and imposing on them a penalty of Rs. 1 lakh. The appellants had received plates and sheets under Rule 57F(4) of the Central Excise Rules, 1944 from M/s. Hyundai Motors India Ltd. (HMIL, for short) for conversion into auto components. After this conversion, however, they chose to clear the auto components on payment of duty under Rule 52A invoice instead of clearing the same in terms of Notification No. 214/86 -CE without payment of duty. The duty -paid components were used by M/s. HMIL in the manufacture of motor vehicles. The appellants utilised capital goods credit for payment of duty on the auto parts cleared to the automobile manufacturers. The department objected to this, and this objection was sustained by the original and first appellate authorities. The authorities took the view that, as job workers having received raw materials from the principal manufacturer under Rule 57F(4) challans, the appellants ought to have cleared the auto parts manufactured out of such material, without payment of duty under Notification No. 214/86 -CE ibid. According to them, the auto parts were exempt from payment of duty of excise and, therefore, no credit of duty paid on capital goods used for the manufacture of such goods was admissible to them. Reference was also made to Rule 57R(1), which provided that no MODVAT credit was available to capital goods used exclusively for the manufacture of exempted final products. The case of the appellants is that they were at liberty to clear their products on payment of duty under Rule 52A invoice or to clear them without payment of duty under Rule 57F(4) challan and Notification No. 214/86 -CE. Where the product (auto components) was cleared on payment of duty, the appellants were eligible for capital goods credit. In this factual situation, Rule 57R(1) was not applicable. Learned Counsel has reiterated this case of the appellants and claimed support from the Tribunal's decision in Bright Steel Mac Fabrics v. Commissioner of Central Excise, Ahmedabad , wherein it was held that job -worker could not be compelled to follow the procedure under Notification No. 214/86 -CE and was at liberty to return the goods processed by them to the principal manufacturer on payment of duty. It is pointed out that this decision of the Tribunal was affirmed with the dismissal of Civil Appeal Nos. 4527 -4539 of 1996 (filed by the department) by the Hon'ble Supreme Court vide Collector v. Bright Steel Mac Fabrics 1997 (94) E.L.T. A.145 (S.C.). We have heard learned SDR also, who has reiterated the findings of the Commissioner (Appeals).

(2.) AFTER considering the submissions, we have found valid challenge in this appeal against the denial of capital goods credit. In the case of Bright Steel Mac Fabrics (supra), a small scale industrial unit was doing job work for a customer, who had supplied raw material under challans issued under Rule 57F(2) [subsequently renumbered as 57F(4)]. The job worker returned the processed goods on payment of duty after availing SSI benefit under Notification No. 175/86 -CE. The department issued a show -cause notice alleging that the job worker ought to have followed the procedure under Notification No. 214/86 -CE. The Tribunal held that the job worker could not be compelled to follow the procedure under Notification No. 214/86 -CE. This decision of the Tribunal was upheld by the Supreme Court vide 1997 (94) E.L.T. A.145.

(3.) THE case of the appellants is well -supported by the decision in Bright Steel Mac Fabrics (supra). In the result, the impugned order is set aside and the appeal is allowed. (Dictated and pronounced in open court)