2006 (9) TMI 405 - AT - Central Excise

Summary

Issues Involved:
1. Interpretation of provisions under Rule 3 of Cenvat Credit Rules, 2001/2002 for clearance of packing material.
2. Determination of value under Section 4 of the Central Excise Act, 1944 for goods transferred back to the principal manufacturer.
3. Applicability of Second proviso to Section 35B(1) regarding the maintainability of appeal based on the duty amount involved.

Issue 1 - Interpretation of Rule 3 of Cenvat Credit Rules:
The case involved the clearance of packing material by the respondents under sub-rule 4 of Rule 3 Cenvat Credit Rules, 2001/2002. The provision required the manufacturer of final products to pay duty when inputs or capital goods are removed from the factory. The Commissioner (Appeals) noted that the expression "removed, as such from the factory" in the sub-rule indicated that removal could be for any purpose, including transfer. As the packing material was obsolete and removed as such, the value was to be determined as provided in the sub-rule. The Tribunal set aside the impugned order, stating that the order was not sustainable due to this interpretation, and the appeal was allowed.

Issue 2 - Determination of value under Section 4 of the Central Excise Act:
The department contended that the goods were transferred back to the principal manufacturer, and thus, the value should be determined under sub-section 1(b) of Section 4 of the Act. However, the respondents argued that the goods were delivered to popular traders on behalf of the principal manufacturer, as evidenced by the invoices. The respondents supported the Commissioner (Appeals)'s conclusion that the goods should be valued in terms of sub-rule 4 of Rule 3, which indirectly refers to Section 4(1)(a). The Tribunal reviewed the documents and upheld the Commissioner (Appeals)'s decision, finding no irregularity in the determination of the goods' value.

Issue 3 - Applicability of Second proviso to Section 35B(1):
The respondents raised the issue of the duty amount involved in the appeal being less than Rs. 50,000, arguing that the appeal was not maintainable under the Second proviso to Section 35B(1). The Tribunal, after reviewing the impugned order, grounds of appeal, and cross objections, found no irregularity in the Commissioner (Appeals)'s decision on the value of the goods. As the duty amount involved was indeed less than Rs. 50,000, the Tribunal rejected the Revenue's appeal on both grounds and allowed the Cross objections in favor of the assessee.

This detailed analysis of the judgment addresses the interpretation of provisions under Rule 3 of Cenvat Credit Rules, the determination of value under Section 4 of the Central Excise Act, and the applicability of the Second proviso to Section 35B(1) in the context of the legal issues involved in the case.