2008 (1) TMI 668 - AT - Central Excise

Summary

Issues involved: Interpretation of Notification No. 214/86-C.E. dated 25-3-86, liability to pay duty on goods processed by job workers, applicability of duty exemption on fully exempted goods.

The judgment by the Appellate Tribunal CESTAT, KOLKATA, involved a case where the appellants, manufacturers of railway wagons fully exempted from duty, received duty-paid goods from outside. The goods were sent to job workers for processing and then returned to the appellants for use in manufacturing exempted wagons. The adjudicating Commissioner, based on an audit objection, ordered the appellants to pay duty amounting to Rs. 73,43,923 on the processed goods. The Tribunal noted that the impugned order was not valid as it contravened Notification No. 214/86-C.E. dated 25-3-86, which applies only when finished goods are leviable to duty, which was not the case for the fully exempted wagons manufactured by the appellants.

Upon reviewing the case records and the impugned Notification, the Tribunal concluded that the Notification was not applicable to the appellants' situation since the finished goods (wagons) were fully exempted from duty. The question of paying duty on goods processed by job workers was deemed irrelevant to the appellants, who did not manufacture those goods. The Tribunal highlighted that if the Department considered the processed goods dutiable, demand notices should have been issued to the job workers. Since no demand notices were issued to the job workers and they were not part of the appeal, the Tribunal refrained from delving into the excisability of the processed goods. It was clarified that the appellants were not liable to pay duty on the processed materials, even if they were considered excisable, under Notification 214/86-C.E. dated 25-3-86. Consequently, the impugned order was set aside, and the appeal was allowed, with the cross-objection also being disposed of.