AURANGABADCENTRAL EXCISE APPEAL NO.1 OF 2025 Commissioner of Central GSTand Central Excise v. M/s. Dish TV India Limited

cen.ex-appeal-1.251 IN THE HIGH COURT OF JUDICATURE AT BOMBAYBENCH AT AURANGABADCENTRAL EXCISE APPEAL NO.1 OF 2025Commissioner of Central GSTand Central Excise, Aurangabad,Town Center, N-5, Cidco,Aurangabad - 431003 ...APPELLANT (Orig. Respondent) VERSUS M/s. Dish TV India Limited,(Formerly known as Videocon D2H Ltd.),FC-19, Film City, Sector 16A,Noida – 201 301 (U.), Having its local office atIB90 Pratap Nagar, Near OsmanpuraPolice Station, Aurangabad 431 001. ...RESPONDENT (Orig. Appellant) ... Mr. D.S. Ladda Advocate for Appellant. Mr. A.R. Madhav Rao Advocate a/w. Mr. Mukund Rao Advocate and Mr. Krishna Rao Advocate for Respondent. ... CORAM: SMT. VIBHA KANKANWADI AND HITEN S. VENEGAVKAR, JJ. DATE : 28th NOVEMBER, 2025 ORDER [PER SMT. VIBHA KANKANWADI, J.] :1.Heard learned Advocate Mr. Ladda appearing for the cen.ex-appeal-1.252appellant and learned Advocate Mr. A.R. Madhav Raoappearing for respondent, who appears suo moto.2.The present Appeal arises out of the Judgment and finalorder No. FO/ST/A/85261/2025-ST[DB], dated 25th February2025, passed by Customs, Excise and Service Tax AppellateTribunal, Mumbai, in Service Tax Appeal No.87927 of 2019,which was arising out of order in OriginalNo.04/ST/COMMR/2019-20, dated 4th July 2019, passed by theCommissioner of Central GST and Central Excise, Aurangabad.3.Learned Advocate appearing for the appellant has giventhe brief statement of facts that M/s. Dish TV India Limited(formerly known as M/s. Videocon D2H Limited) was providingbroadcasting services to their customers. The assessee forrendering broadcasting services and for completing theConditional Access System (CAS), procured Set Top Boxes (STB)domestically in India. However, the assessee imported ‘smartcards’ from the overseas supplier located abroad and the CVDamount paid on the said imported smart cards was availed asCenvat Credit by the assessee. Further, the assessee wassending smart cards free of cost to the manufacturer of Set TopBox, namely M/s. Trend Electronics Limited on delivery challans. cen.ex-appeal-1.253On inquiry about the removal of smart cards free of cost, thedepartment officers were told that smart cards were inserted inSet Top Boxes manufactured by M/s. Trend Electronics Limitedand thereafter the assessee was purchasing the said Set TopBoxes from M/s. Trend Electronics Limited. It was then found bythe department that the assessee was availing Cenvat Credit onthe smart cards and after that they were removing them for usein the manufacture of Set Top Boxes and not for job work.Therefore, Cenvat Credit availed by the assessee on smart cardswas not admissible to them. The assessee was required toreverse the Cenvat Credit availed by them at the time ofclearance of smart card to M/s. Trend Electronics Limited underRule 3(5) of Cenvat Credit Rules, 2004. The amount of CenvatCredit was not reversed by the assessee during the period fromJanuary 2014 to June 2017, which was to the tune ofRs.42,19,49,134/-. When all these detailed investigations weredone, department had issued show cause notice on 11th January2019 for the demand of the Cenvat Credit amount as aforesaid,along with interest and penalty. The show cause notice wasadjudicated vide order in Original (OID) No.4/ST/COMMR/2019-20 dated 4th July 2019 and the assess was directed to paythe aforesaid amount along with interest and penalty. Thereafter cen.ex-appeal-1.254the assessee preferred an appeal to the appellate tribunal whichallowed the appeal and quashed the show cause notice. Againstthe said decision, the present Appeal has been filed.4.Learned Advocate appearing for the appellant departmenthas vehemently submitted that the activity of pairing and testingof smart cards and subsequent assembling of the Set Top Boxes,does not fall within the term ‘job work’. The assessee has notmaintained the job work register. There was also no record keptat consignor end or consignee end in respect of inputs clearedand received. In fact the Appellate Tribunal ought to have heldthat smart cards were tested, paired and assembled in the SetTop Boxes, such process undertaken should be termed asmanufacturing activity as per Section Note 6 of Section XVI ofCentral Excise Tariff Act, 1985. The assessee was availing CenvatCredit of imported/purchased smart cards and clearing them toM/s. Trend Electronics Limited for manufacture of Set Top Boxeson delivery challans free of cost on a returnable basis. The claimof the assessee that the clearance of smart cards to M/s. TrendElectronics Limited was on job work is not correct. No job workchallans were used for the movement of goods from theassessee to M/s. Trend Electronics Limited as required underRule 4(5)(a) of Cenvat Credit Rules, 2004 and also no job work cen.ex-appeal-1.255charges had been paid/recovered on account of job work. At thetime of clearance of smart cards, the assessee was not reversingthe Cenvat Credit availed by them on import/purchase of thesame. The process and procedure adopted by the assessee forclearance of smart cards to M/s. Trend Electronics Limited wasnot as per law and therefore, the assess is required to pay anamount equal to Cenvat Credit availed by them on the smartcards at the time of clearance as it was nothing but the removalof smart cards. The assessee has contravened the provisions ofRule 3(5) of Cenvat Credit Rules, 2004. The documents were notavailable at the time of visit and investigation. The movement ofsmart cards was without job work challans. When all theseimportant aspects have not been considered, substantialquestions of law are arising and therefore, the Appeal needs tobe admitted. The proposed substantial questions of law involvedare thus:-“1) Whether the Hon’ble Tribunal is correct in allowingthe retention of the Cenvat credit of ‘smart cards’ tothe respondent, when such inputs are cleared ‘as such’to the premises of STB manufacturer i.e. M/s. TrendElectronics Ltd.?2) Whether the Cenvat credit availed on ‘smart cards’ isrequired to be reversed under Rule 3(5) of the Cenvat cen.ex-appeal-1.256Credit Rules of 2004, or, there is no requirement of anysuch reversal, in terms of Rule 4(5)(a) of Cenvat CreditRules of 2004, particularly in context with the facts andevidences available on records?3) Whether the Hon’ble Tribunal is correct in allowingthe retention of the Cenvat Credit of ‘Smart Cards’ tothe respondent in terms of Rule 4(5)(a) of CenvatCredit Rules of 2004, when the respondent has notfollowed the prescribed procedure under said CenvatRules in respect of inputs sent to STB (Set Top Box)manufacturer?”5.Learned Advocate for respondent relied on the reasonsgiven by the appellate tribunal and submits that elaboratereasons have been given and interpretation of law that has beenmade is correct. Sub-rule (1) of Rule 3 of the Rules 2004 is theenabling provision, which entitles either a manufacturer ofexcisable goods or a provider of the output service to takeCenvat Credit of various duties and service tax itemized therein.A manufacturer is permitted to take Cenvat Credit of such dutiesor taxes paid by it on any inputs or capital goods, when thesame are received in the factory of manufacture of final product.The Cenvat Credit so taken under sub-rule (1) is permitted to beutilized in the manner prescribed in sub-rule (4) there under. Thebasic objective behind allowing Cenvat Credit on inputs, input cen.ex-appeal-1.257services or capital goods is to provide instant credit ofduties/taxes paid thereon and consequential reduction in thecost, by avoiding the cascading effect. The pairing and testing ofsmart cards with the Set Top Boxes get completed only when thebar code of the smart card matches with the bar code of Set TopBox, which is essential in providing access to DTH services underthe conditional access system. The adjudicating authority hasnot considered the entire process but had considered only thepart of it.6.We find much substance in the submissions made onbehalf of the respondent. Elaborate reasonings are given. Hereinthis Appeal we are required to see whether any substantialquestion of law has been made out. Taking assessment of thefacts is to a limited extent in order to arrive at the conclusionthat any substantial question of law has been shown. Now, theappellant say that above three substantial questions of law areinvolved in the matter. As per our opinion, those substantialquestions which have been suggested by the appellant are notpurely the substantial questions of law, taking into considerationthe assessment that has been done by the first appellate cen.ex-appeal-1.258authority i.e. Customs, Excise and Service Tax AppellateTribunal, Mumbai. 7.There is no dispute regarding the facts, in a way thatthough the smart cards were imported, yet they were notinserted in the Set Top Boxes as it is. They were required to begiven for processing to M/s. Trend Electronics Limited. Now, M/s.Trend Electronics Limited has not carried out any manufacturingactivities as regards the smart cards received from the assessee.They have simply paired the bar code of the smart card with thatof Set Top Box. Rule 2(n) of the Cenvat Credit Rules, 2004prescribes “job work”. It means processing or working upon ofraw material or semi-finished goods supplied to the job worker,so as to complete a part or whole of the process resulting in themanufacture or finishing of an article or any operation which isessential for aforesaid process. The testing and pairing was onlywith a view to see whether they are suitable for the customeri.e. the end user. There is no manufacturing activity carried outby M/s. Trend Electronics Limited, as aforesaid. It has beenrightly observed by the Tribunal that the basic objective behindallowing Cenvat Credit on inputs, input services or capital goodsis to provide instant credit of duties/taxes paid thereon andconsequential reduction in the cost. If the Cenvat credit availed cen.ex-appeal-1.259on inputs or capital goods are not used for the intended purposethen to counteract such eventualities, an embargo has also beencreated in the statute for not extending the benefit of Cenvatfacility. Rule 2(n) has to be read in conjunction with Rule 4(5)(a)(i) of the Cenvat Credit Rules, 2004. Job work per se may ormay not lead to manufacture. But the usage of the Rule 4(5)(a)is wide enough to cover any activity carried on the input by thejob worker and in those cases the Cenvat credit on inputs neednot be reversed under Rule 3(5) of the Cenvat Credit Rules,2004. In fact, the facts of the case disclose that the operationsof testing and pairing of the smart cards sent to the Set Top Boxmanufacturer would be covered under the phrase ‘furtherprocessing, testing or any other purpose.’ 8.Therefore, we are of the opinion that no substantialquestion of law is arising in the present matter and therefore,the Appeal stands dismissed. [HITEN S. VENEGAVKAR] [SMT. VIBHA KANKANWADI] JUDGE JUDGE asb/DEC25