2006 (6) TMI 505 - AT - Central Excise

CENVAT Credit - goods are received back in the factory within one hundred and eighty days of their being sent to a job worker or not - Rule 4(5)(a) of CCR - SSI Exemption - use of brand name of others - procedure under Notification No. 214/86 dated 25-3-1986 not followed - inclusion of value of the clearance of M/s. Rayalaseema Hi-Strength Hypo Ltd. in the aggregate value of the clearance of the appellants for the purpose of computing SSI limits of ₹ 3 crores. CENVAT Credit - goods are received back in the factory within one hundred and eighty days of their being sent to a job worker or not - Rule 4(5)(a) of CCR - HELD THAT - A close reading of Rule 4(5)(a) of CCR makes it clear that a manufacturer can avail CENVAT credit on inputs or capital goods as such or after being partially processed are sent to the job worker for further processing, test, repair, reconditioning or any other purpose; and the goods are received back in the factory within 180 days from the job worker. It is very clear that the above rule does not contemplate payment of duty by the job worker. The duty liability is squarely on the shoulders of the raw material supplier. Therefore, the demand of duty for the reason that raw material supplier has not followed the provision of Notification No. 214/86 is not correct. Therefore we set aside the demand of ₹ 16,02,337/-. Inclusion of value of the clearances of branded goods for SSI exemption - HELD THAT - It has been clearly stated in the relevant Notification at Para 3A(b) that the value of clearance bearing brand name or trade name of another person who is eligible for the benefit of exemption in terms of Para 4 of the Notification, is not to be included in the aggregate value of clearances of excisable goods for home consumption in respect of the manufacturer who avails the benefit of notification. In the present case, as the raw material supplier has his own brand name, he is not entitled for SSI benefit. The goods received from the appellants bearing brand name Anisha were cleared on payment of duty. It is very clear from the above provision that the value of the said clearance is not to be included in the aggregate value of the clearance of the appellants - the demand on this count is also not sustainable. In the result, the entire demand of duty is set aside. Hence no penalty and interest are leviable. The impugned order set aside - appeal allowed.

Summary

Issues:
1. Demand of duty on finished products sent to another company without payment.
2. Inclusion of value of clearance in aggregate value for SSI exemption.
3. Imposition of penalty and interest.

Analysis:
1. The appeal challenged the demand of duty on finished products sent to another company without payment. The Revenue contended that the appellants should have followed a specific procedure and discharged duty on the finished products. The duty was demanded under proviso to Section 11A of the Central Excise Act. The Tribunal ruled that as per Rule 4(5)(a) of the Cenvat Credit Rules, the liability of paying duty is on the supplier, not the job worker. Citing relevant case laws, the Tribunal set aside the demand of duty amounting to Rs. 16,02,337/-.

2. The issue of including the value of clearance in the aggregate value for SSI exemption was raised. The Revenue argued that the value of clearances should have been included in the aggregate value for computing SSI limits. However, the Tribunal referred to Notification No. 8/2003 and relevant case laws to determine that the value of clearance bearing another person's brand name should not be included in the aggregate value for SSI exemption. As the raw material supplier was not entitled to SSI benefit, the demand of Rs. 15,99,611/- was deemed unsustainable.

3. The imposition of penalty and interest was challenged based on the unsustainability of the previous demands. The Tribunal held that since the demands were not sustainable, the imposition of penalty and interest could not be upheld. Therefore, the Order-in-Original was set aside, and the appeal was allowed with consequential relief. The Tribunal concluded that no penalty or interest was leviable due to the setting aside of the entire demand of duty.