2015 (2) TMI 1020 - AT - Central Excise

Waiver of pre deposit - Denial of the benefit of Rule 96D - Held that - Sub-rule (5) of Rule 96D provides that if cotton fabrics after being processed are removed without payment of duty to one or more factories for further processing or to the originating factory, such removal shall be subject to and in accordance with the provisions of sub-rule (3). It is seen that sub-rule (3) of Rule 96D provides that when cotton fabris are removed from the factory from where they are manufactured to another factory including a processing factory, the consignor shall follow the procedure as required under Rule 156A and Rule 156B as modified by Rule 173N of the said Rules. In the instant case, the learned Counsel submitted that there is no dispute that the applicant followed the procedure as provided under sub-rule (3) of Rule 96D. On a perusal of the impugned Adjudication order, we find that the Adjudicating authority proceeded on the basis that the fully processed cotton fabrics removed for further processing of LDPE/HDPE coating, it ceases to retain its identity as cotton fabrics and a new distinct commodity emerges of such coating/lamination. Prima facie, we find that there is no change of identity of the processed fabrics at the hand of the processor. In any event, the process of LDPE/HDPE was undertaken at the hands of the principal CVIL. Hence, we find that the applicant made out a strong prima facie case for waiver of pre-deposit of the entire amount of duty along with interest and penalty - Stay granted.

Summary

Issues: Demand of duty and penalty under Rule 96D of Central Excise Rules, 1944 for clearance of processed fabric without payment of duty.

Analysis:
1. The applicant, a job worker of a company, received Grey Cotton Fabrics, processed them, and returned them without duty payment under Rule 96D. A demand of duty and penalty was imposed for the clearance of processed fabric. The Commissioner (Appeals) upheld the decision.

2. The applicant argued that they followed the procedure under Rule 96D and should be eligible to clear goods without duty payment. They contended that there was no change in the identity of the processed fabrics and that the processing of LDPE/HDPE coating was done at the principal company's premises. They cited a High Court decision stating the show-cause notice lacked jurisdiction.

3. The Revenue representative supported the Commissioner's findings, stating that the demand should be confirmed as the processed fabric did not align with the Tariff Heading. The Revenue argued against the applicant's claims.

4. The Tribunal analyzed Rule 96D, noting that the applicant followed the required procedure. It found that the processed fabrics did not change identity and that the LDPE/HDPE process occurred at the principal company's premises. As a result, the Tribunal ruled in favor of the applicant, waiving the pre-deposit of duty, interest, and penalty until the appeal's disposal. The stay application was allowed.