2006 (5) TMI 386 - AT - Central Excise

Summary

Issues: Duty demand on processed cotton fabrics, imposition of penalties, determination of assessable value under Rule 8 of Central Excise Valuation Rules, 2000, captively consumed processed fabrics, waiver of predeposit and stay of recovery.

Analysis:

The judgment by the Appellate Tribunal CESTAT, CHENNAI involved a case where duty amounts were demanded from the appellants for the periods April 2003 to August 2003 and September 2003 to March 2004, along with penalties, on processed cotton fabrics. The process was carried out by job workers who received unprocessed fabrics from the appellants, processed the material, and supplied the processed fabrics back. The appellants then transferred the goods to their sister unit at Hyderabad, paying duty based on the assessable value comprising raw material cost and job work charges. However, the Department found a shortage in duty payment as it was not paid at the required rate under Rule 8 of the Central Excise Valuation Rules, 2000.

Upon hearing both sides, the Tribunal considered the argument that the processed fabrics were captively consumed in the sister unit, leading to a discussion on the determination of the assessable value under Rule 8. The appellants sought waiver of predeposit and stay of recovery for the duty and penalty amounts, claiming that even if the differential duty was paid, the sister unit could avail Cenvat credit, resulting in a revenue-neutral situation. The Tribunal noted the Revenue's reliance on a circular and clarification by the Board, which, however, was deemed irrelevant to the case at hand.

Based on the grounds of revenue neutrality supported by the lower authorities' findings that the processed fabrics were captively consumed in the sister unit, the Tribunal granted the waiver of predeposit and stay of recovery for the duty and penalty amounts. This decision aimed to address the issue of duty demand and penalties in light of the specific circumstances surrounding the processing and transfer of the fabrics, ensuring fairness and compliance with the relevant excise valuation rules.