CESTAT: HUL Job Workers Liable for Excise Duty Only for Periods Before Claiming Area-Based Exemption
Pranav B Prem
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi, has partly allowed appeals filed by the Commissioner of Central Goods & Service Tax (CGST), Dehradun, in a dispute over excise duty liability involving Hindustan Unilever Limited (HUL) and its job workers, M/s Today Jobs and M/s Maxima Solutions.
The bench of Justice Dilip Gupta (President) and Member (Technical) P.V. Subba Rao held that the benefit of an optional area-based excise duty exemption under Notification No. 50/2003-CE could not be granted for periods before an assessee formally opted for it. The Tribunal likened the decision to claim such an exemption to an insurance claim decision, noting that opting for the exemption is a business choice that carries implications, such as the loss of CENVAT credit.
The dispute arose from job work activities undertaken by Today Jobs and Maxima Solutions during 2009–10, which included wrapping, pouching, labelling, and packing HUL’s products. Both job workers had treated these processes as taxable services under “Business Auxiliary Service” and paid service tax. However, the department contended that these activities amounted to “manufacture” under the Central Excise Tariff, making them liable for central excise duty instead of service tax.
Under Notification No. 50/2003-CE, manufacturers in certain notified areas could claim full excise duty exemption if they opted for it before effecting the first clearance. Maxima filed its declaration on March 31, 2010, opting for the exemption from March 15, 2010, while Today filed its declaration on the same date, opting from March 30, 2010. Despite this, the CGST Commissioner extended the exemption retrospectively and dropped duty demands in their entirety, relying on the Tribunal’s earlier decision in Vasantham Enterprises.
On appeal, the Tribunal found that the exemption could only apply from the date mentioned in the declarations and not earlier. Accordingly, it upheld duty demands for Maxima from August 1, 2009, to March 14, 2010, and for Today from July 1, 2009, to March 29, 2010, with applicable interest. The Tribunal rejected the Revenue’s fresh ground in appeal that the job workers were not located in notified areas, noting that this issue was never raised in the show cause notices and that both units were indeed in the specified Khasras.
The Tribunal also refused to impose penalties under Section 11AC of the Central Excise Act, holding that there was no evidence of fraud, suppression, or intent to evade duty. It accepted that the job workers were under the impression that service tax was payable and had been paying it. Likewise, the proposed penalty on HUL under Rule 26 of the Central Excise Rules was quashed, as there was no allegation of goods liable for confiscation or of issuing invoices without supply of goods. The Tribunal dismissed two of the Revenue’s appeals entirely and partly allowed the remaining two, confirming excise duty demands with interest against Today Jobs and Maxima Solutions for the periods prior to their opting for the area-based exemption. The penalties proposed against all parties were set aside.
Appearance
Counsel For Appellant: Rakesh Agarwal
Counsel For Respondent: M.H. Patil
Cause Title: Commissioner Of Central Goods And Service Tax-Dehradun V. M/S Hindustan Unilever Limited
Case No: Excise Appeal No.52196 OF 2024
Coram: Justice Dilip Gupta [President], P.V. Subba Rao [Member (Technical)]
