2016 (6) TMI 872 - AT - Central Excise

Cenvat Credit - Job Work - assessee sent their grey man-made fabrics to the job worker for processing and return - Revenue took the view that these goods, being in the nature of finished products, cannot be cleared to the job worker under Rule 4(5)(a) read with Rule 12B of Central Excise Rules, 2002 - Held that - It is not in dispute that the ultimate products which has been cleared by the appellant-assessee are processed fabrics and the appropriate duty has been paid at that stage by them. Keeping this in view, we have no hesitation in categorising the grey fabrics as input/ intermediate products. Rule 4(5)(a) of the Cenvat Credit Rules as also Rule 12B permits such goods to be sent to the job worker for further processing and after processing by the appellant assessee on payment of appropriate duty. Under the circumstances, we find that the view taken by the Commissioner to consider these goods as finished goods is totally erroneous and the demand of duty itself is without the sanction of law. - No demand - Decided against the revenue.

Summary

Issues:
Categorization of grey fabrics as inputs or finished products for excise duty purposes.

Analysis:
The judgment involves two appeals, one by the appellant assessee and the other by the Revenue, against the Commissioner's order dated 17.10.2007. The dispute revolves around the categorization of grey fabrics sent by the appellant assessee to a job worker for processing and return. The Commissioner held that grey fabrics are finished products and demanded excise duty on them, leading to a recovery order of the duty difference. The appellant challenges this view, arguing that since duty was paid on the final processed fabrics, no duty should be levied on the grey fabrics at the intermediate stage. The Revenue, on the other hand, contends that full duty should be demanded on the grey fabrics.

The central issue in this case is the categorization of grey fabrics as either inputs or finished products. The Tribunal analyzed the situation, considering that grey fabrics could be viewed as inputs or intermediate products based on the final processed fabrics cleared by the appellant assessee. Since duty was paid on the final products, the Tribunal categorized the grey fabrics as input/intermediate products, in line with Rule 4(5)(a) of the Cenvat Credit Rules and Rule 12B. The Tribunal found the Commissioner's view of considering grey fabrics as finished goods to be erroneous and without legal sanction. The judgment referred to previous decisions, such as Valentino Syntex Pvt. Ltd. Vs. Commissioner of C. EX., Jaipur, where a similar conclusion was reached, supporting the appellant's position.

Ultimately, the Tribunal set aside the Commissioner's order dated 17.10.2007, ruling in favor of the appellant-assessee and dismissing the Revenue's appeal. The judgment clarifies the legal position regarding the treatment of grey fabrics in excise duty matters, emphasizing the importance of considering the final products cleared by the assessee in determining the categorization of intermediate goods.