2011 (3) TMI 1564 - AT - Central Excise

Summary

Issues: Disallowance of credit on Partially Oriented Yarn (POY) under Rule 57F(2) challan for conversion into twisted yarn by job workers at 'Nil' rate of duty.

In the judgment delivered by the Appellate Tribunal CESTAT CHENNAI, the issue revolved around the disallowance of credit amounting to Rs. 22,17,900/- taken as BED and SED, and Rs. 3,32,686/- taken as AED (T&T) on Partially Oriented Yarn (POY) purchased by the assessees. The POY was sent directly to job workers for conversion into twisted yarn under Rule 57F(2) challan, and upon return to the assessees, it was used in the further manufacture of finished fabrics cleared on duty payment. The contention was that since the job worker cleared the twisted yarn at a 'Nil' rate of duty as per Notification No. 6/2002, the input credit on the POY was deemed to have been utilized.

The Tribunal considered both sides and concluded that as the twisted yarn made from duty paid POY was cleared by the job worker at a 'Nil' rate of duty, the question of the job worker utilizing actual credit on the POY did not arise. Therefore, the benefit of input credit on POY should be admissible to the assessees. The Tribunal upheld the order of the Commissioner (Appeals) that extended such credit and set aside the penalty, ultimately rejecting the appeal. Furthermore, the cross-objection filed by the assessees was deemed as comments on the Revenue's appeal and was dismissed. The judgment was dictated and pronounced in open court by the Tribunal.