2006 (2) TMI 443 - AT - Central Excise

Summary

Issues:
1. Waiver of pre-deposit of duty and penalty.
2. Liability for Central Excise duty on made-ups under Chapter 63.

Analysis:
1. The case involved an application for the waiver of pre-deposit of duty amounting to Rs. 30,07,089/- and an equal penalty arising from the order of the Commissioner of Central Excise (Appeals), Mumbai. The duty demand on readymades falling under Chapter 52, totaling Rs. 2,54,581/-, was confirmed, with the applicants not contesting this amount and already paying Rs. 1,67,137/- after adjusting input stage credit. However, since the department did not allow further adjustment of input stage credit, the applicants were required to deposit the balance amount of Rs. 87,444/- for readymades under Chapter 62.

2. The bulk duty demand was confirmed on made-ups falling under Chapter 63 based on the argument that even though the raw materials were supplied by the applicants to job workers for manufacturing bed sheets and pillow covers, the finished goods were delivered to the applicants and sold exclusively in the NTC mills showroom. The contention was that since the applicants had full ownership of these goods, they were liable to discharge the duty liability.

3. The Tribunal considered the issue of liability for Central Excise duty on the suppliers of raw material. It was noted that Rule 12B of the Central Excise Rules, 2002, provided for the discharge of duty liability by the person who gets yarns, fabrics, readymade garments, or made-up textile articles produced or manufactured on his own account on job work. The Tribunal observed that this rule came into force from 1-4-2003, and for the period in dispute (August 1998 to March 2003), the duty liability could not be imposed on the applicants as suppliers of raw material.

4. Considering the circumstances, the Tribunal directed the pre-deposit of Rs. 87,444/- as the balance duty payable on readymades falling under Chapter 62 within four weeks. The Tribunal also waived the pre-deposit of the balance duty confirmed on made-ups falling under Chapter 63 and the penalty, with a stay on the recovery pending the appeal. Compliance was to be reported by 7-3-2006 as per the Tribunal's order.