2006 (11) TMI 58 - AT - Central Excise

Demand Alleged that appellant were liable to pay duty on the transfer of semi-processed good to the other unit After considering the facts the respective authority allowed consequential relief to the appellant

Summary

Issues Involved:
Interpretation of Central Excise Rules regarding the duty liability on processed fabrics sent for further processing.

Detailed Analysis:

Issue 1: Liability to discharge duty on processed/semi-processed fabrics sent for carbonizing
The appellants, processors of fabrics, sent processed/semi-processed fabrics to another processor for carbonizing and further processing. The impugned order held the appellants liable to discharge duty on the fabrics at the time of their removal for carbonizing, resulting in a duty demand. The appellants argued that the Central Excise Rules allowed dispatch of goods for further processing without immediate duty payment, citing Rule 56B, 57F(3), and 57F(iv). The adjudicating authority rejected this argument, stating that duty should have been paid before removal for processing to avoid revenue loss.

Issue 2: Interpretation of Rule 56B for removal of finished or semi-finished goods
The Tribunal analyzed Rule 56B, which allows the removal of goods under manufacture for certain purposes without payment of duty. The Rule specifies that goods can be sent for manufacturing processes or tests and then brought back for clearance on payment of duty. The Tribunal emphasized that if duty had to be paid before removal, there would be no need to bring back the goods for clearance, especially after testing, as testing does not attract duty. The Tribunal concluded that the Commissioner's view, requiring duty payment before removal, contradicted the Rule's purpose of facilitating duty-free removal for additional processes and subsequent duty payment upon clearance.

Conclusion:
The Tribunal ruled in favor of the appellants, stating that the demands failed due to the incorrect interpretation of Rule 56B by the Commissioner. The appeals were allowed, providing consequential relief to the appellants.