Dinesh Textiles Vs Commissioner of Central Excise, Customs and Service Tax (Supreme Court)
Noting that Central Excise Rule 12B and the notification talked about ‘aggregate value’ of clearances of job worker, the Supreme Court has held that assessee manufacturing textiles through job workers would be liable once aggregate value crossed the threshold. The Apex Court rejected assessee’s reliance on third illustration in CBEC Circular dated 30-10-2003. It held that third illustration did not fit in the scheme of Rule 12B. The assessee had pleaded that liability will be only in respect of a particular job worker whose clearance had exceeded threshold.
FULL TEXT OF THE HONORABLE SUPREME COURT JUDGEMENT
1. These appeals filed under Section 35L of the Central Excise Act, 1944 (hereinafter referred to as “the Excise Act”) question the correctness of the Final Order dated 06.02.2018 passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Bangalore (hereinafter referred to as “the Tribunal) in Central Excise Appeal No.E/370/2008-DB and Misc. Order No. 20697 of 2018 dated 15.06.2018 passed by the Tribunal rejecting application seeking rectification of mistake.
2. The Appellants are traders who get cotton fabrics and made-ups mentioned in Chapters 52 and 53 of the Central Excise Tariff Act, 1985 (the ‘Tariff Act’, for short) manufactured through job workers.
3. On 25.03.2003 Rule 12B was inserted in Central Excise Rules, 2002 to deal with “Job work in textiles and textile articles”. The relevant portion of Rule 12B is as under:
“RULE 1[12B. Job work in textiles and textile articles. – (1) Notwithstanding any thing contained in these rules, every person (not being an export-oriented unit or a unit located in special economic zone) who gets 2[yarns or fabrics falling under Chapter 50, 51, 52, 53, 54, 55, 58 or 60, readymade garments falling under Chapter 61 or 62 or made up textile articles falling under Chapter 63 of First Schedule to the Tariff Act] produced or manufactured on his account, on job work (herein after referred to as “the said person”) shall obtain registration, maintain accounts, pay duty leviable on such goods and comply with all the relevant provisions of these rules, as if he is an assessee :
Provided that the job worker may, at his option, agree to obtain registration, maintain accounts, pay the duty leviable on such goods, prepare the invoice and comply with the other provisions of these rules. In such a case the provisions of these rules shall not apply to the said person. The job worker, may, at his option, authorize the said person to, on his behalf as his agent, maintain accounts, pay duty, prepare invoice and comply with any of the provisions of these rule except that of rule 9 :
Provided further that the job worker may make an option to undertake the activities mentioned in this sub-rule as an agent or person authorized by the said person and in such a case, the said job worker shall be deemed to be the said person ”
4. Soon thereafter Exemption Notification was issued by the Government of India on 30.04.2003 wherein exemption was granted for clearances upto 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. The substantive part of the Notification was as under:
“In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts first clearances for home consumption, upto an aggregate value not exceeding twenty lakh rupees made on or after the 1st day of April in any financial year, of fabrics, not subjected to any process falling under Chapter 51, 52, 54, 55, 58 or 60 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (herein after referred to as the specified goods), from the whole of the duty of excise specified thereon in the First Schedule to the said Central Excise Tariff Act and the First Schedule to the said Additional Duties of Excise (Goods of Special Importance) Act :
Provided that during the financial year 2003-2004, the exemption contained in this notification shall apply to the first clearances for home consumption of the specified goods, upto an aggregate value not exceeding twenty lakh rupees made on or after the 30th day of April 2003.
2. The exemption contained in this notification shall apply subject to the following conditions, namely,-
(i) where a manufacturer clears the specified goods from one or more factories, the exemption in his case shall apply to the said aggregate value of clearances for home consumption and not separately for each factory;
(ii) where the specified goods are cleared by one or more manufacturers from a factory, the exemption shall apply to the said aggregate value of clearances for home consumption and not separately for each manufacturer;
(iii) the aggregate value of clearances for home consumption of specified goods, by the said manufacturer from one or more factories, or from a factory by one or more manufacturers, does not exceed twenty five lakh rupees in a financial year :
Provided that in the financial year 2003-2004, the exemption shall apply only if the aggregate value of clearances of specified goods, by a manufacturer from one or more factories, or from a factory by one or more manufacturers, does not exceed twenty five lakh rupees during the period beginning from the 30th day of April, 2003:
Provided further that in any financial year, if the aggregate value of clearances for home consumption of specified goods exceeds twenty five lakh rupees, or as the case may be, in the financial year 2003-2004, if the aggregate value of clearances for home consumption of specified goods during the period beginning from the 30th day of April, 2003 exceeds twenty five lakh rupees, the said manufacture shall pay the amount of duty as payable, on the said first clearances of the specified goods of twenty lakh rupees, but for the exemption contained in this notification, within thirty days of the day when such clearance exceeds the said twenty five lakh rupees;
(iv) the manufacturer shall keep all documents relating to purchase of yarns;”
5. By further Notification No.47/2003-CE dated 17.05.2003 the earlier notification dated 30.04.2003 was amended as under:
