2004 (7) TMI 401 - AT - Central Excise

Summary

Issues: Duty liability on goods removed for re-processing and manufacture of different product, applicability of Circular No. 22/71-C.Ex.6, interpretation of Rule 9(1) and Rule 49 of Central Excise Rules.

In this judgment by the Appellate Tribunal CESTAT, Bangalore, the appellant sought relief against the duty demanded on Spaghetti removed for re-processing into Vermicelli. The appellant's representative argued that the permission granted by the Superintendent of Central Excise for re-processing implied no duty liability as per Circular No. 22/71-C.Ex.6, allowing transfer of defective goods for re-processing without duty payment. The appellant cited relevant case laws and the Self-Removal Procedure Handbook to support their claim that duty is not applicable on goods cleared for re-processing. However, the Revenue contended that duty is leviable on Spaghetti if used in manufacturing Vermicelli, a duty-exempt product, based on Rule 9(1) and Rule 49 of Central Excise Rules. The Revenue highlighted that the appellant voluntarily sought permission for re-processing from the Superintendent, who did not exempt duty on Spaghetti used in Vermicelli production.

Upon analysis, the Tribunal observed that the appellant did not assert the Spaghetti as unfit for consumption or unsuitable for marketing, nor did they request duty remission. The appellant processed the Spaghetti into Vermicelli, a duty-exempt item, necessitating duty payment on the initial product under Rule 9 and Rule 49. The Tribunal emphasized that duty is applicable when goods cleared within the factory are used in manufacturing products subject to nil or exempt duty. The Tribunal dismissed the appeal, affirming the Commissioner's decision, as the case did not align with the cited case laws and Circular, upholding the duty liability on the Spaghetti cleared for re-processing and subsequent use in Vermicelli production.