[Order per: M. Veeraiyan] 1.1. Appeal No. E/1086/2009 is by Federal Mogul Goetze (India) Ltd. against the order of the Commissioner No. 13/2009 dated 07.09.2009 challenging demand of Rs. 6,11,96,239/- being inadmissible CENVAT credit availed on the common inputs and input services during the period March 2005 to June 2008 along with interest and imposition of equal amount as penalty. 1.2. Appeal No. E/1087/2009 is by Shri M. Subramani against penalty of Rs. 2,00,000/- by above order dated 07.09.2009. 1.3. Appeal No. E/1159/2009 is by Federal Mogul TPR (India) Ltd. against the order No. 15/2009 dated 25.09.2009 challenging demand of Rs. 2,02,00,275/- being inadmissible CENVAT credit availed during April 2007 to June 2008 along with interest and imposition of penalty of equal amount. 1.4. Appeal No. 1160/2009 is by Shri M. Subramani against imposition of penalty of Rs. 25,00,000/- by the above order dated 25.09.2009. 1.5. These four appeals arising out of two different orders of Commissioner are closely interconnected and, therefore, are being dealt with by this common order.

2. Heard both sides extensively. 3.1. The relevant facts, in brief, are as follows: 3.2. Federal Mogul TPR (India) Ltd. (hereinafter referred to as manufacturer-appellant) and Federal Mogul Goetze (India) Ltd. (hereinafter referred to as job worker-appellant) are sister concerns and both are engaged in manufacture of excisable goods namely, piston rings. The manufacturer-appellant has taken CENVAT credit of duty paid on such piston rings in coil form. The job worker-appellant has facility for undertaking chrome plating work. The job worker-appellant received piston rings in coil form under material movement challans from the manufacturer and undertook chrome plating and returned to the manufacturer-appellant who used the chrome plated piston rings for further manufacture. 3.3. The job worker-appellant has adopted different practices in respect of payment of duty/tax which are as follows: (a) Prior to January 2007 the job worker-appellant cleared the chrome plated piston rings on payment of central excise duty on the value comprising the cost of consumables and other job work charges. The manufacturer-appellant took CENVAT credit of excise duty so paid by the job worker. (b) As a consequence of audit objection, they stopped paying excise duty on job work of chrome plating from January 2007. Instead, they voluntarily paid on 22.08.2007 service tax of Rs. 1,38,56,610/- for the past period April 2005 to December 2006. They also paid service tax of Rs. 8,09,128/- for the month of January 2007. (c) They did not pay service tax during the period February 2007 to December 2007 and availed exemption from payment of service tax in terms of notification No. 8/2005 ST dated 01.03.2005. (d) For the period January 2008 to June 2008, they paid service tax of Rs. 55,34,537/- on chrome plating activity. (e) They availed CENVAT credit of service tax amounting to Rs. 7,75,68,982/- on common input services during the period May 2005 to June 2008. Out of the above Rs. 2,08,33,809/- was credit of input services specified under Rule 6 (5) of the CENVAT Credit Rules. Balance of Rs. 5,67,35,173/- related to other input services. (f) They availed CENVAT credit of Rs. 44,61,066/- on common inputs such as chromium acid and anodes. 4.1 Show-cause notice dated 09.01.2009 was issued alleging that the job worker-appellant was manufacturing dutiable goods and providing exempted service (chrome plating) and that they had not maintained separate accounts in terms of Rule 6(2) of CENVAT Credit Rules 2004 and, therefore, they were required to reverse a total sum of Rs. 6,11,96,239/- (Rs. 44,61,066 + Rs. 5,67,35,173) and proposing penalties. In pursuance of the show-cause notice, the Commissioner passed the impugned order dated 07.09.2009 confirming the demand as proposed along with interest and appropriating Rs. 2,02,00,275/- paid as service tax. He also imposed penalty of Rs. 2,00,000/- under Rule 25 of the Central Excise Rule on the job worker-appellant. In addition, he also imposed a penalty of Rs. 2,00,000/- on Shri Subramani, the other appellant. 4.2 It was held that the job worker-appellant had wrongly paid service tax and consequently passed on inadmissible CENVAT credit amounting to Rs, 2,02,00,275/- during the period April 2005 to June 2008 to the manufacturer-appellant and, accordingly, show-cause notice dated 09.01.2009 was issued to the manufacturer-appellant proposing recovery of the said amount and proposing imposition of penalties on Shri Subramani and others. In pursuance of the show-cause notice, the Commissioner vide impugned order dated 22.09.2009 confirmed the demand as proposed along with interest and imposed equal amount of penalty on the manufacturer-appellant. In addition, he imposed a penalty of Rs. 25,00,000/- on Shri M. Subramani who is the other appellant. There is also a penalty of Rs. 25,00,000/- on Shri Rajan Luthra whose appeal, if any, is not before us. 5.1. Learned Advocate for the appellants challenged the demands and imposition of penalties on various grounds. Main submissions are as follows: (a) The finding of the Commissioner that the job worker-appellant has wrongly paid excise duty on the activity of chrome plating as it was exempted under notification 214/1986 CE dated 25.03.1986 is erroneous as the said exemption under Section 5A (1A) of the Central Excise Act is a conditional exemption and the same need not be compulsorily availed. (b) Notification No. 8/2005 ST dated 01.03.2005 is also a conditional exemption and same need not be compulsorily availed. Further, no provisions similar to Section 5A (1A) of the Central Excise Act is available in the Finance Act 1994 and therefore, the question of compelling an assessee to avail a service tax exemption and that too a conditional exemption does not arise. (c) When the goods are cleared by the job worker-appellant without payment of excise duty for further utilization in the manufacture of final products which are cleared on payment of duty by the manufacturer, the restriction contained in Rule 6 of CENVAT Credit Rules is not attracted. (d) Similarly, when goods are cleared by job worker-appellant without payment of service tax for further utilization in the manufacture of final products which are cleared on payment of duty by the manufacturer, the restriction in Rule 6 of CENVAT Credit Rules is not applicable. (e) The credit taken by the manufacturer-appellant having been utilized for payment of duty, the same amounted to reversal of credit taken. (f) Manufacturer can avail CENVAT credit of duty paid on input or input services used by the job worker. (g) Demand of 4,49,78,867/- relating to the period March 2005 to September 2007 from job worker-appellant is clearly time barred as there is no mis-declaration and the issue involved interpretation of complex legal provision. (h) For the same reason no penalty can be imposed. 5.2. In support of the above submissions, he relies on the following decisions:

a) Sterlite Industries (I) Ltd. Vs. CCE, Pune - 2005 (183) ELT 353 (Tri.-LB)

b) CCE, Mumbai III Vs. Dil Ltd. - 2008 (9) STR 411 (Tri.-Mum.)

c) Maersk India Pvt. Ltd. Vs. CCE, Raigad - 2008 (12) STR 150 (Tri.-Mum.)

d) Spic (HCD) Ltd. Vs. CCE, Chennai - 2006 (201) ELT 386 (Tri.-Chennai)

e) Pascal Paramount Pvt. Ltd. Vs. CCE, New Delhi - 1998 (98) ELT 199 (Tri.)

f) IOCL Vs. CCE, Guntur - 2006 (206) ELT 533 (Tri.-Bang.)

g) CCE & Cus. Vs. MDS Switchgear Ltd. - 2008 (229) ELT 485 (SC)

h) CCE & Cus., (Appeals), Ahmedabad Vs. Narayan Polyplast - 2005 (179) ELT 20 (SC)

i) CCE & Cus., Vadodara Vs. Narmada Chematur Pharmaceuticals Ltd. - 2005 (179) ELT 276 (SC)

j) CCE, Chandigarh Vs. Industrial Cables (I) Ltd. - 1999 (108) ELT 513 (Tri.)

k) Shriram Properties Ltd. Vs. CST, Bangalore - 2007 (7) STR 3 (Kar.)

l) Hero Cycles Ltd. & Anr. Vs. CCE, Chandigarh - 2003 (54) RLT 764 (CEGAT-Del.)

6. Learned Joint CDR strongly defended the orders of the Commissioner. He drew our attention to the finding that the process of chrome plating does not amount to manufacture in terms of Section 2 (f) of the Central Excise Act and, therefore, the job worker paying excise duty during certain period is not justified. Further the job worker paying service tax when the service tax is exempted under Notification 8/2005 ST is also not warranted. 7.1 We have carefully considered the submissions from both sides and perused the records. 7.2. The departments case against the job worker-appellant rests on a few major findings. Firstly chrome plating has been held as not amounting to manufacture and, therefore, excise duty on chrome plated piston rings should not have been paid by the job workerappellant. The second finding is to the effect that since the activities of job work did not amount to manufacture, the job worker-appellant was liable to pay service tax. Further, it has been held that since the said job work has been undertaken for another manufacturer who has paid excise duty, the job worker-appellant was eligible for exemption from payment of service tax in terms of Notification 8/2005 ST dated 01.03.2005 and the same should have been availed compulsorily. It has been alleged that the job worker appellant has not maintained separate accounts for receipt, consumption and inventory of (a) inputs which have gone into the process of Chrome Plating for their sister concern, M/s. FMTPR, as well as for their own manufactured goods; (b) input services meant for use in the manufacture of dutiable final products and exempted services in contravention of rule 6(2) of the CENVAT Credit Rules, 2004. Consequently, the job worker-appellant has become disentitled to avail CENVAT credit on common input services and inputs as they were manufacturing dutiable goods and were rendering exempted services and accordingly a total demand of Rs. 6,11,96,239/- stands demanded. 7.3. The Departments case against the manufacturer-appellant is on the finding that the job worker-appellant having wrongly paid service tax amounting to Rs. 2,02,00,275/- has wrongly passed on the credit to manufacturer-appellant and manufacturer-appellant has wrongly availed the same and, therefore, the same deserves to be recovered along with penal consequences. 8.1. It would be appropriate to recall the concept of job work and the legal implications under the Excise law. 8.2. The practice of getting certain processes done by job worker and getting goods manufactured on job work basis is a widely prevalent practice in the manufacturing section. A person who is sending material to a job worker is being referred to as principal manufacturer and the person who undertakes the processes or manufacture the product for job charges is treated as a job worker. The activities/processes undertaken by the job worker may amount to manufacture as per Central Excise Law or it may not. The job worker, in addition to using the material supplied by the principal manufacturer, may use his own material for undertaking the job work and the job charges collected by him will, obviously, include the cost of his own material used by him for the job work. In other words, in respect of job-worked item the raw materials are contributed partly by the principal manufacturer and the rest by the job worker. Labour is contributed by the job worker. When the job-worked items are received back by the principal manufacturer, the same may be used for further manufacture or may be sold as such. When the final products are sold by the principal manufacturer obviously the value of job charges also become part of the cost of the materials so sold. 8.3. When the processes/activities undertaken by the job worker amounts to manufacture, the job worker is construed as the manufacturer and, therefore, the job worker becomes liable to pay excise duty. However, by Notification No. 214/86 CE dated 25.03.1986, it has been provided that instead of the job worker, the liability can be discharged by the principal manufacturer subject to the conditions mentioned in the said notification. 8.4. CENVAT Credit Rules provide for taking credit by the principal manufacturer and sending the material without reversing the credit for the purpose of job work. It also provides for taking credit on any input or input service used in the manufacture of intermediate product by the job worker. This is evident from Rule 3 of the CENVAT Credit Rules the relevant portion of which read as under: Rule 3 - CENVAT credit - A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit of including the said duties, or tax, or cess paid on any input or input service, as the case may be, used in the manufacture of intermediate products, by a job worker availing the benefit of exemption specified in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 214/86-Central Excise, dated the 25th March, 1986, published in the Gazette of India vide number G.S.R. 547(E), dated the 25th March, 1986, and received by the manufacturer for use in, or in relation to, the manufacture of final product, on or after the 10th day of September, 2004. 8.5. There are also provisions in law and case law relating to valuation of goods manufactured on job work basis and the same need not be narrated in the present proceedings. 8.6. It suffices to say that the tax liability and CENVAT credit availability in respect of goods manufactured on job work basis are sought to be treated to be same as those applicable to the goods manufactured by the principal manufacturer. 9.1. Undisputedly the manufacturer-appellant has procured duty paid piston rings in coil form and taken CENVAT credit of the duty paid on the said piston rings. The said raw material has been sent to the job worker-appellant under material movement challans for the purpose of chrome plating. We agree with the findings of the Commissioner that the activities of chrome plating does not amount to manufacture in the hands of the job worker-appellant and, therefore, the chrome plated piston rings are not excisable goods. 9.2. It is not in dispute that the manufacturerappellant having taken CENVAT credit can send the materials in terms of Rule 4 (5) (a) of the CENVAT Credit Rules for the purpose of undertaking certain processes whether such processes amount to manufacture or not. Therefore, the job worker-appellant could have undertaken the job work of chrome plating and returned the job-worked material to the manufacturer-appellant without payment of duty in terms of Rule 4 (5) (a) of the CENVAT Credit Rules. 9.3. Once chrome plated piston rings are not treated as excisable goods at the hands of job worker-appellant, the question of availing any exemption at his end does not arise and therefore, the said goods cannot be treated as exempted goods. 9.4. Rule 4 (5) (a) of the CENVAT Credit Rules reads as under: The CENVAT credit shall be allowed even if any inputs or capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair, re-conditioning [, or for the manufacture of intermediate goods necessary for the manufacture of final products] or any other purpose, and it is established from the records, challans or memos or any other document produced by the manufacturer or provider of output service taking the CENVAT credit that the goods are received back in the factory within one hundred and eighty days of their being sent to a job worker and if the inputs or the capital goods are not received back within one hundred eighty days, the manufacturer or provider of output service shall pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods by debiting the CENVAT credit or otherwise, but the manufacturer or provider of output service can take the CENVAT credit again when the inputs or capital goods are received back in his factory or in the premises of the provider of output service. 9.5. From the above, it could be seen that removal of the goods by manufacturer-appellant under Rule 4 (5) (a) of the CENVAT Credit Rules is not restricted for the purpose of manufacture of excisable goods and it can also be for the purpose of undertaking any process which may not amount to manufacture. 9.6. Rule 4 (5) (a) of the CENVAT Credit Rules is a self contained rule envisaging that a manufacturer who was eligible to take credit, having taken the credit, can send the material to a job worker for further processing, testing, repair, reconditioning or for the purpose of manufacture of intermediate goods necessary for the manufacture of final products or for any other purpose. The material could be sent without the manufacturer appellant reversing the credit taken on the inputs. The processing undertaken by the job worker may or may not amount to manufacture. When the activities of job worker does not amount to manufacture, the return of the job-worked goods back to the manufacturer-appellant completes the obligation on the part of the job worker. If the activities of the job worker amount to manufacture, then the liability to duty is on the job worker who is the manufacturer. Even in such a situation, the job worker is permitted to remove without payment of duty provided the raw material supplier (in this case manufacturer-appellant) undertakes to pay the duty involved. To enable such clearance without payment of duty notification 214/86 comes to the rescue of the job worker. 9.7. The job worker is also entitled to take credit of duty paid on inputs and service tax paid on input services utilized in undertaking the job work activities. This is permissible in the light of decision of the Larger Bench of the Tribunal in the case of Sterlite Industries (I) Ltd. Vs. CCE, Pune 2005 (183) E.L.T. 353 (Tri.-LB). In the said decision, the Tribunal considered the interplay of Rule 57F and Rule 57C of the erstwhile Central Excise Rules. In the said case, the principal manufacturer who has taken credit on inputs has sent the inputs under 57F to the job worker for certain processes and the job worker who has used inputs received by him in the activities of job work was held to be eligible for credit on such inputs even though the job-worked goods were returned to the principal manufacturer without payment of duty by the said job worker. The relevant portion of the said decision is as under: Modvat credit of duty paid on the inputs used in the manufacture of final product cleared without payment of duty for further utilization in the manufacture of final product, which are cleared on payment of duty by the principal manufacturer, would not be hit by provision of Rule 57C. Inasmuch as, the matter stands decided by the Honourble Supreme Court, we would hold in favour of assessee. 10.1. One of the issues to be considered is whether the Notification 214/1986 is an unconditional notification and therefore the job worker-appellant should have availed the said notification as contemplated under Section 5A(1A) of the Central Excise Act. The Notification No. 214/86 during the relevant period reads as under: In exercise of the powers conferred by sub-section (1) of section 5A of 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), (herein after referred to as Special Importance Act), and sub-section (3) of section 136 of the Finance Act, 2001 (14 of 2001), the Central Government being satisfied that it is necessary in the public interest so to do, hereby exempts goods specified in column (1) of the Table hereto annexed (hereinafter referred to as the said goods) manufactured in a factory as a job work and:- (a) used in relation to the manufacture of final products specified in column (1) of the said Table,

(i) on which duty of excise is leviable in whole or in part; or

(ii) for removal to a unit in a free trade zone or to a hundred per cent export-oriented undertaking or to a unit in an Electronic Hardware Technology Park or Software Technology Parks or for supply to the United Nations or an international organization for their official use or for supply to projects funded by them, on which exemption of duty is available under notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 108/95-Central Excises, dated the 28th August, 1995, or

(ii) for removal under bond for export, or

(iv) by a manufacturer of dutiable and exempted final products, after discharging his obligation in respect of said goods under rule 6 of the CENVAT Credit Rules, 2002; or (b) cleared as such from the factory of the supplier of raw materials or semi-finished goods-

(i) on payment of duty for home consumption (on which duty of excise is leviable whether in whole or in part); or

(ii) without payment of duty under bond for export; or (iia) by a manufacturer of dutiable and exempted final products, after discharging his obligation in respect of said goods under rule 6 of the CENVAT Credit Rules, 2002; or

(iii) without payment of duty to a unit in a free trade zone or to a hundred per cent export-oriented undertaking or to a unit in an Electronic Hardware Technology Park or Software Technology Parks or supply to the United Nations or an international organization for their official use or supply to projects funded by them, on which exemption of duty is available under notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 108/95-Central Excises, dated the 28th August, 1995, from the whole of the duty of excise leviable thereon, which is specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), the additional duty of excise leviable thereon, which is specified in the Schedule to the said Special Importance Act and National Calamity Contingent duty leviable under sub-section (1) of section 136 of the Finance Act, 2001 (14 of 2001). (2) The exemption contained in this notification shall be applicable only to the said goods in respect of which,-

(i) The supplier of the raw materials or semi-finished goods gives an undertaking to the Assistant Commissioner of Central Excise having jurisdiction over the factory of the job worker that the said goods shall be (a) used in or in relation to the manufacture of the final products in his factory; or (b) removed without payment of duty from his factory;

(i) under bond for export, or

(ii) to a unit in a free trade zone or to a hundred per cent Export-oriented undertaking or to unit, an on electronic Hardware Technology Park or Software Technology Parks or supplied to the United Nations or an international organization for their official use or supplied to projects funded by then, on which exemption of duty is available under notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 108/95, Central Excise, dated the 28th August 1995, or

(iii) by a manufacturer of dutiable and exempted final products, after discharging his obligation in respect of said goods under rule 6 of the CENVAT Credit Rules, 2002; or (c) removed on payment of duty for home consumption from his factory; (d) used in the manufacture of goods of the description specified in column (1) of the Table hereto annexed by another job worker for further use in any of the manner provided in clause (a), (b) and (c) as above.

(ii) the said supplier produces evidence that the said goods have been used or removed in the manner prescribed above; and

(iii) the said supplier undertakes the responsibilities of discharging the liabilities in respect of the Central Excise duty leviable on the final products. Explanation: I For the purposes of this notification, the expression job work means processing or working upon of raw materials or semi-finished goods supplied to the job worker, so as to complete a part or whole of the process resulting in the manufacture or finishing of an article or any operation which is essential for the aforesaid process. TABLE Description of inputs Description of final products (1) (2) All goods falling under the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other polyester filament yarn falling under heading All goods falling under the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than matches. 10.2. The Notification 214/1986, though has been issued under Section 5A of the Central Excise Act, the same is not an exemption notification per se. A job worker who undertakes the job work which is amounting to manufacture is, legally, the manufacturer. In respect of goods manufactured on job work basis cleared by the job worker, he is required to pay excise duty due at the time of clearance of job-worked goods to the raw material supplier. Notification 214/1986 basically provides an option to the job worker not to pay the excise duty if the raw material supplier undertakes to pay the excise duty on the said products and undertakes to use them for further manufacture of excisable goods which are ultimately cleared on payment of duty. In other words, it does not exempt the duty on the job-worked items but it merely shifts the liability to a person other than the job worker and also shifts the date of payment of duty that is instead of reckoning from the date of clearance from the premises of the job worker, the same is to be reckoned from the date of clearance by the principal manufacturer (the person who supplied material to the job worker for the purpose of getting job work done). To consider this notification as an unconditional notification and to hold that the job worker-appellant should not have paid the duty may not be appropriate. 10.3. There is another reason for not forcing any job worker to avail the benefit of Notification No. 214/86 CE dated 25.03.1986. The job worker is not expected or required to know the nature of disposal of job-worked goods sent by him to the supplier. The condition regarding payment of the duty on the final products manufactured using job-worked items sent by the job worker is to be fulfilled by the principal manufacturer. The job worker cannot be expected to compel the principal manufacturer to take over the responsibility of payment of duty on the job-worked items. Unless the supplier of the raw materials or semi-finished goods gives an undertaking to the jurisdictional central excise authority in charge of the job worker for discharging the liabilities in respect of Central Excise duty leviable on the finished products, the question of job worker even opting for the same does not arise. 11.1. It is seen that the job worker-appellant for the period prior to January 2007 has been paying excise duty on the value of material used by them and job charges collected by them. However, having realized that the said activities did not amount to manufacture, they have chosen to pay service tax for the period January 2007, for the period January 2008 to June 2008 and also for the earlier period April 2005 to December 2006 (for this period the amount was paid on 22.08.2007). Thus, they have paid totally service tax amount of Rs. 2,02,00,275/- during the above period which according to the department should not have been paid. 11.2. The job worker-appellant has chosen to pay service tax during the period April 2005 to January 2007 (in respect April 2005 to December 2006 they paid later in August 2007) and also during the period January 2008 to June 2008. The finding of the Commissioner is that they were eligible for exemption under Notification 8/2005 ST and they ought to have compulsorily availed the benefit of the notification. He has held that they have deliberately paid service tax on exempted service with intention to pass on the credit. 11.3. The Notification No. 8/2005 ST reads as under: In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service of production of goods on behalf of the client referred in sub-clause (v) of clause (19) of section 65 of the said Finance Act, from the whole of service tax leviable thereon under section 66 of the said Finance Act : Provided that the said exemption shall apply only in cases where such goods are produced using raw materials or semi-finished goods supplied by the client and goods so produced are returned back to the said client for use in or in relation to manufacture of any other goods falling under the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), as amended by the Central Excise Tariff (Amendment) Act, 2004 (5 of 2005), on which appropriate duty of excise is payable. Explanation. - For the purposes of this notification, -

(i) the expression production of goods means working upon raw materials or semi-finished goods so as to complete part or whole of production, subject to the condition that such production does not amount to manufacture within the meaning of clause (f) of section 2 of the Central Excise Act, 1944 (1 of 1944);

(ii) appropriate duty of excise shall not include Nil rate of duty or duty of excise wholly exempt. 11.4. The above notification has been issued under Section 93 (1) of the Finance Act and the exemption is subject to the condition that appropriate duty of excise is paid by the sender of the raw materials or semi-finished goods. In other words, any job worker who undertakes services of processing is not free to opt for the benefit of the said notification unless the recipient of the services pays appropriate duty of excise on the goods returned back by the job worker. This condition cannot be fulfilled by the job worker independently and the evidence for the fulfillment of the condition apparently has to come from third parties and depends upon their cooperation. The fulfillment of the condition namely for use in or in relation to manufacture of any other goods--on which appropriate duty of excise is payable is on the manufacturer of final products (in this case the manufacturer-appellant). Such a notification cannot be considered as unconditional notification and hence cannot be thrust on the provider of service in the form of job work like the job worker-appellant, in the present case. 11.5. Further, vis-`-vis the specific provision for compulsorily availing unconditional exemption issued under Section 5A (1A) of the Central Excise Act, there is no corresponding provision in the Finance Act 1994 relating to service tax. It has also not been shown that the said provision under Central Excise Act has been made applicable to the service tax.

12. It was projected as if the payment of excise duty on the value of consumables and job charges by the job worker for 21 months (April 2005 to December 2006) and payment of service tax due for 21 months (April 2005 to December 2006) and also payment of service tax for the months of January 2007, January 2008 to June 2008 were done with intention to evade payment of duty and service tax and accordingly penalties have been imposed invoking the provisions of Rule 15 (2) and Rule 15(4) of CENVAT Credit Rules read with Section 11AC of the Central Excise Act, 1944. Even if the appellant-job worker has paid excise duty/service tax which was not required to be paid by them, the same cannot, by any stretch of imagination, be treated as with intention to evade excise duty/service tax. Therefore, at any rate, there is no justification for imposing penalties under the above mentioned rules and section.

13. As regards the manufacturer-appellant, it has been held that the job worker-appellant having wrongly paid service tax has consequently passed on inadmissible CENVAT credit amounting to Rs. 2,02,00,275/-. We do not agree that the job worker - appellant has wrongly paid the service tax as we have already held that there was no merit in the finding that the job worker appellant was bound to avail the service tax exemption. In view of the above, the question of the manufacturer - appellant taking the credit wrongly does not arise.

14. From the foregoing, the following emerges:

a) Manufacturer-appellant taking credit on piston rings in coil form and sending the same under Rule 4 (5) (a) for the purpose of chrome plating is in order.

b) As the activity of chrome plating does not amount to manufacture and no excisable goods emerge, there is no question of exemption from excise duty and, therefore, levy of service tax is attracted on the said activities.

c) The exemption under Notification No. 8/2005 ST being a conditional exemption subject to fulfillment of obligation by the raw material supplier, the same cannot be thrust on the job worker-appellant. Therefore, payment of service tax by the job worker-appellant is in order.

d) Job worker-appellant cannot be held to have provided any exempted services attracting the provisions of Rule 6 of CENVAT Credit Rules.

e) The job worker appellant cannot be held to have had any intention to evade excise duty/service tax.

f) The credit taken by the manufacturer appellant of the service tax paid by the job worker appellant is in order.

15. In view of the above, the impugned orders are set aside and the appeals allowed with consequential relief as per law. (Pronounced in court on ..) (M. VEERAIYAN) (P.G. CHACKO) MEMBER (TECHNICAL) MEMBER (JUDICIAL) iss