1. Job work for supplying corrugated boxes using supplied raw materials — Claim for excise duty exemption under Rule 8(1) of Central Excise Rules, 1944. (Para 1 , 2 )
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1996 Supreme(SC) 1869
SUPREME COURT OF INDIA
K.Venkataswami : S.P.Bharucha
Appellate Collector Of Central Excise
Versus
Wadpack Private Limited
Case No. : .
Date of Decision : 11/6/96
Excise duty exemptions for "job work" must be interpreted to benefit factories charging only for the work performed. Strict insistence that the exact same article be returned to the customer would defeat the notification's purpose of taxing only the value of the job work.
Headnote:(A) Central Excise Rules, 1944 - Rule 8(1) - Exemption Notification dated 31/1/1975 - Job work - Exemption from excise duty - Goods manufactured as job work are exempt from duty in excess of the duty calculated on the basis of the amount charged for the job work - Interpretation of "job work" - Insistence that the same article must be returned to the customer after manufacturing would rob the notification of its substance - Notification intended to benefit factories charging customers only for the work performed, where the value of the article is the value of the job work and not the total value of the article. (Para 4)
Facts of the case:
The respondent was entrusted with the job work of supplying corrugated boxes, for which the customer supplied the required kraft paper. The respondent claimed the benefit of an exemption notification which exempts goods manufactured as job work from excise duty in excess of the duty calculated on the amount charged for the job work. The High Court held that the respondent was entitled to such exemption.
Findings of Court:
The court found that the case is covered by previous judicial precedent which held that the purpose of the notification is to assist factories performing job work that charge only for the services rendered.
Issues: Whether the respondent was entitled to the excise duty exemption under the notification for job work.
Ratio Decidendi: The court ruled that the requirement for the same article to be returned to the customer should not be interpreted so strictly as to defeat the purpose of the exemption notification, as the intent is to tax only the value added through job work.
Result: Appeal dismissed.
Legal Category Hierarchy
Table of Contents
2. Whether the respondent is entitled to excise duty exemption for job work despite the Revenue's challenge to the High Court's conclusion. (Para 3 )
3. Strict insistence on returning the same article to the customer would defeat the substance of the notification intended to benefit job workers charging only for work done. (Para 4 )
4. Exemption for job work applies when the worker charges only for the work performed, regardless of whether the exact same article is returned. (Para 4 )
5. Appeal dismissed. (Para 5 )
6. Does the excise duty exemption for job work require the exact same article to be returned to the customer?
No. Insisting on the return of the same article would rob the notification of its substance, as the intent is to assist factories that charge customers only for the work performed. (Para 4 )
7. What is the primary purpose of the exemption notification for job work under the Central Excise Rules?
The notification is intended to help factories performing job work that charge their customers only for the work done, ensuring the value is based on the job work charge rather than the total article value. (Para 4 )
(1) THE respondent was entrusted by M/s. ITC Ltd., Bangalore, with the job work of supplying corrugated boxes. For this purpose ITC supplied the required kraft paper. (These facts are taken from the Special Leave Petition itself and are not in dispute).
(2) THE respondent claimed the benefit of an Exemption Notification dated 31/1/1975 issued under Rule 8(1 of the central Excise Rules, 1944,exempting goods "manufactured in A factory as a job work from so much of the duty of excise leviable thereon as is in excess of the duty calculated on the basis of the amount charged for the job work.
EXPLANATION: For the purposes of this notification, the expression job work shall mean such item of work where an article intended to undergo manufacturing process is supplied to the job worker and that article is returned by the job worker to the supplier after the article has undergone the intended manufacturing process, on charging only for the job work done by him."
(3) THE High court came to the conclusion in the writ petition that was filed by the respondent that the respondent was entitled to such exemption, and it is the order of the High court which is under challenge by the Revenue.
(4) THE very Notification has been analysed by this court in Prestige Engineering(India) Ltd. & Ors. v. Collector of central Excise, Meerut & Ors., 1994 (73 E.L.T. 497 (S.C.) = 1994 (6 SCC 465, and this court has held that the insistence of the Revenue upon the same article being returned to the customer after undergoing the manufacturing process at the hands of the job worker would rob the Notification of substance. It had to be remembered that the Notification was intended to help factories doing job work, which were charging their customers only for the work done by them. In their hands the value of the article was the value of the job work done by them and not the total value of the article, which would have been the case but for the Notification.
(5) THE judgment aforesaid clearly covers the case before us. Following it, the appeal is dismissed, with no order as to costs.
