2008 (6) TMI 370 - HC - Central Excise

Job work - respondent admittedly, cleared ingots to the job worker in terms of Rule 57F(3) of the Central Excise Rules without payment of duty on the ground that if there is duty liability on the final product - Tribunal has only considered the exemption available on job worker under Notification No. 214/86, whereas the exemption claimed and disallowed in respondent s case is under Notification No. 16/97. Since Tribunal has not considered respondent s liability in payment of duty on the re-rolled products, but has decided the appeal by treating the demand as one pertaining to clearances of ingots, order of the Tribunal set aside and restore the appeal back to the Tribunal for fresh decision after hearing the parties.

Summary

Issues:
Appeal against CESTAT order cancelling demand on re-rolled products cleared by respondent under Notification No. 16/97 - Tribunal's error in considering duty on ingots instead of re-rolled products - Eligibility for SSI exemption under Notification No. 16/97 - Tribunal's reliance on other tribunal decisions - Need for fresh decision by Tribunal after considering respondent's liability on re-rolled products.

Analysis:
The High Court of Kerala heard an appeal filed by the Commissioner of Central Excise against the order of the CESTAT, which had cancelled the demand raised on the respondent regarding re-rolled products cleared under Notification No. 16/97. The respondent supplied steel ingots to a job worker for conversion into re-rolled products and claimed exemption under Notification No. 16/97 when receiving the re-rolled products back. The issue arose when duty was demanded on the final product due to the respondent not being engaged in manufacturing, thus disallowing the SSI exemption. The Tribunal erred in assuming the duty was on the ingots, whereas it was actually on the re-rolled products cleared by the respondent.

Upon reviewing the Tribunal's order, the High Court found that the Tribunal had made a fundamental error in its assessment. The duty demand was on the re-rolled products cleared by the respondent, not on the ingots supplied to the job worker. The Tribunal's decision was based on the wrong premise, as it did not consider the respondent's liability for duty on the re-rolled products. Additionally, the Tribunal's reliance on decisions of other tribunals and its focus on the exemption under Notification No. 214/86 instead of No. 16/97 further complicated the matter.

Consequently, the High Court set aside the Tribunal's order and directed a fresh decision to be made after considering the respondent's liability on the re-rolled products. The Tribunal was instructed to reevaluate the case, taking into account the correct duty liability and the eligibility of the respondent for the SSI exemption under Notification No. 16/97. The importance of accurately assessing the duty on the final product, rather than the intermediary ingots, was emphasized for a fair and just resolution of the dispute.