Order Date – 19th July 2022

Facts – 

• The appellant, M/s Agrawal Metal Works Pvt. Ltd., manufactures Copper Wire, Brass Wire, Copper Sheet and Brass Sheet. In addition, the appellant also undertakes for other firms job work of converting copper and copper alloys.
• In respect of the job work, the appellant availed exemption from central excise duty under Notification No. 214/86-CE dated 25.03.1986. 
• As per the scheme of this notification, the appellant would clear intermediate goods to the supplier of the raw material who would complete the manufacturing process and pay excise duty on the final product at his end.
• On 18.06.2018, a show cause notice was issued stating that the appellant was rendering an exemption service when it was manufacturing dutiable goods.
• Accordingly, a demand of Rs. 1,67,85,366/- was made on the appellant for an amount under Rule 6 (3), equal to 7% of the value of the exempted services with interest and penalty.
• Aggrieved the Appellant filed an appeal.

Issue – 

• Whether the appellant was rendering an exemption service when it was manufacturing dutiable goods?

Order – 

• The Authorities were of the opinion that revenue having accepted the excise returns claiming the process to be manufactured and knowing that the appellant was claiming the exemption notification from Excise duty, Revenue cannot at the same time take a stand that the processes amount to rendering a service and that such service was an exempted service.
• Relying on the Tiara Advertising versus Union of India (HC Andhra Pradesh) the court held that the various options under Rule 6 are given to the assessee and the Revenue cannot choose one of the options and force it upon the assessee. Even if the assessee is rendering exempted services or manufacturing exempted goods and using common input services no demand can be sustained under Rule 6 (3) as this is only one of its options available to assessee to fulfill its objection.
• The impugned order, therefore, cannot be sustained and is liable to set aside.