2015 (11) TMI 1029 - AT - Central Excise

Duty demand - removal of semi-finished goods under Rule 16B to the Job worker - Held that - Rule 16B empowers the Commissioner, Customs, to permit a manufacturer to remove the excisable goods which are in the nature of semi-finished goods, for carrying out certain manufacturing process, to some other premises and to bring back such goods to his factory, without payment of duty. Admittedly in the present case, the Commissioner has granted the permission to remove the yarn. As such, I find that the conditions of Rule 16B stands fully satisfied. Otherwise also, I find that the appellants received fibre which are converted into yarn and such yarn is cleared for further conversion into fabrics by the job worker. As such, it is the said fabrics which have to be considered as the final product and the yarn is entitled to be considered as semi-finished goods which are further used in the manufacture of fabric. As such, I am of the view that Rule 16B fully applies to the facts of the present case. The said issue also stands decided by the Tribunal in the case of Valentino Syntex Pvt. Ltd. v. CCE, Jaipur 2008 (2) TMI 806 - CESTAT, NEW DELHI . In the said decision, the yarn received by the manufacturer was converted into grey fabrics in their factory and was subsequently cleared to the job work for further processing. The Tribunal has held that the movement of grey fabrics to the job worker and return of man-made fabric to the appellant were in accordance with the erstwhile Rule 16B of Central Excise Rules, 2002. As such, the issue stands decided. Otherwise also, if the appellants are made liable to pay the duty on the yarn so cleared to the job worker, they are entitled to Cenvat credit of the duty so paid, which can be utilised by them for payment of duty on the fabrics, so received by them from the job worker. As such, the entire situation is revenue neutral. On the basis of the above discussions, I set aside the impugned order - Decided in favour of assessee.

Summary

Issues:
1. Whether the appellant was required to pay duty on yarn cleared to the job worker under Rule 16B.

Analysis:
1. The judgment revolves around the appellant engaged in manufacturing yarn from fiber, clearing it to a job worker for conversion into fabric, and receiving the fabric back for further clearance. The Revenue contended that yarn is not an intermediate product, thus not covered under Rule 16B for duty payment. Despite Commissioner's permission, duty demand was raised on the cleared yarn.

2. The crucial question was whether duty payment on the cleared yarn was necessary as per Rule 16B and the Commissioner's permission. Rule 16B allows manufacturers to remove semi-finished excisable goods for processing elsewhere without duty payment. The Commissioner had granted permission for yarn removal, satisfying Rule 16B conditions. The Tribunal's precedent in Valentino Syntex Pvt. Ltd. v. CCE, Jaipur supported this interpretation, where a similar situation was deemed compliant with Rule 16B.

3. Furthermore, even if duty was payable on the cleared yarn, the appellants were entitled to Cenvat credit for the duty paid. This credit could offset duty liabilities on the fabric received back from the job worker, resulting in a revenue-neutral scenario. Consequently, the impugned order was set aside, and the appeal was allowed with relief for the appellants.