Fact: M/s. Dinesh Textiles (“the applicant”)was a traders who get cotton fabrics and made-ups mentioned in Chapters 52 and 53 of the Central Excise Tariff Act, 1985 (the ‘Tariff Act’) manufactured through job workers. On March 25, 2003, Rule 12B was inserted in Central Excise Rules 2002 to deal with ‘Job work in textiles and textile articles’. Thereafter, exemption notification was issued by Government of India on April 30, 2003 where exemption was granted for clearances up to Rs. 20 lakhs in respect of processes falling under Chapters 51, 52, 54, 55, 58 or 60 of the First Schedule to the Tariff Act. By further Notification No. 47/2003-CE dated May 17, 2003, the earlier notification was amended. As there were doubts regarding the extent of applicability of the aforesaid exemption Notifications, a clarification was issued by Government of India vide circular dated October 30, 2003.
Applicant’s Contention of law: Applicant contended that the job workers were the manufacturers and no liability could be fixed on the traders. The applicant submitted that in terms of Circular dated October 30, 2003 the duty was not demanded if the value of clearance of job workers was less than Rs.25 lakhs individually and the Revenue could raise demand only in respect of the clearance value of that job worker when the value was in excess of Rs. 25 lakhs. On the other hand the Revenue submitted that in terms of Circular, if the clearance value of one job worker were to be in excess of Rs. 25 lakhs, then the dealers would be liable in respect of the clearances of all the job workers and aggregate value thereof.
Held: The Hon’ble Supreme Court vide its Civil Appeal Nos.9740-9741 of 2018 dated February 28, 2019 held that the language of exemption notification as amended was quite clear, however certain doubts were raised which were clarified by Circular dated October 30, 2003. SC stated that the said circular gave 3 illustrations where under first, even though the clearances of the job worker qua each of three traders was Rs. 20 lakhs since the aggregate value of clearance was Rs. 60 lakhs, he would not be eligible to claim any benefit and must pay due in respect of entire clearance. Therefore, Supreme Court observed that the assessment made by the Commissioner (Appeals) & CESTAT was therefore correct as it was not the individual clearance of one single job worker exceeding the limit of Rs. 25 lakhs but the aggregate of all clearances made by the assessee which was liable to duty.
Citation: [ TS-94-SC-2019-EXC ]