2002 (11) TMI 718 - AT - Central Excise

Summary

Issues:
Determining assessable value of soap noodles manufactured by Lever, denial of credit on grounds of time limit and duty transfer compliance.

Analysis:
1. Assessable Value Dispute: The appellant, a job worker, manufactured soap cakes using soap noodles supplied by Lever. The duty paid on these inputs was credited by the appellant. Lever paid duty on the soap noodles, and the appellant took credit based on Rule 57E certificates. The dispute arose when the department proposed to deny credit due to the time limit and duty transfer compliance issues.

2. Time Limit Ground: The Assistant Commissioner initially denied credit, stating it was taken beyond six months from input receipt. However, the Commissioner (Appeals) overturned this, citing a Board circular that did not specify any time limit for taking credit. This ground was dropped, leading to the focus on the duty transfer compliance issue.

3. Duty Transfer Compliance: The denial of credit was based on the argument that the duty incidence from Lever to the appellant was not passed on as per Rule 57E requirements. The Commissioner (Appeals) upheld this denial, emphasizing the absence of a sale-purchase transaction between the parties for the soap noodles. The Commissioner highlighted the necessity of the duty element recovery by the input manufacturer and the simultaneous passing of its incidence to avail credit.

4. Interpretation of Rule 57E: The Commissioner's reasoning focused on the lack of a sale-purchase transaction between the appellant and Lever, suggesting the duty incidence transfer did not occur. However, the appellate tribunal disagreed, stating that Rule 57E does not mandate the transfer of duty incidence through a sale-purchase mechanism. The tribunal emphasized that the duty debit by Lever to the appellant's account before taking credit indicated the duty incidence had been passed on, making the appellant eligible for credit.

5. Conclusion: The appeals were allowed, setting aside the denial of credit by the Commissioner (Appeals). The tribunal concluded that the duty incidence had been effectively transferred, meeting the requirements of Rule 57E, and thus, the appellant was entitled to take credit. This judgment clarifies the interpretation of duty transfer compliance under Rule 57E in cases involving job workers and input manufacturers.