2016 (7) TMI 86 - AT - Central Excise

Grey fabric manufactured to the job worker - whether is required to be treated as intermediate products so as to invoke provision of Rule 16(B) - Held that - In the case of M/s. Valentino Syntex Pvt. Ltd. Vs. CCE Jaipur 2008 (2) TMI 806 - CESTAT, NEW DELHI while considering an identical issue, it was held that the grey fabric manufactured by the assessee out of duty paid yarn and cleared to the job worker for further processing and subsequently received and cleared on payment of duty are required to be extended the benefit of Rule 16(B) of Central Excise Rules by considering the same as intermediate goods. Also as the permission granted by the Commissioner in terms of Rule 16 (B) on 17.12.04 has not been withdrawn by him and was still in existence, Revenue cannot take a stand against the said permission. The duty paid by the job worker was available as credit to the appellant who was in a position to utilise the same for payment of duty on the final product. Inasmuch as the appellant has admittedly paid the duty on the grey fabrics which have come back to them from the job worker, we fully agree with the learned advocate that entire exercise was only a paper exercise leading to a revenue neutral position.- Decided in favour of assessee

Summary

Issues:
Interpretation of Rule 16(B) regarding treatment of grey fabrics as intermediate goods for duty payment.

Analysis:
The appellant, engaged in manufacturing yarn from duty paid fibers, cleared the yarn to job workers under Rule 16(B) with proper permission. The Revenue contended that the grey fabrics produced by the appellant should be treated as final excisable goods, leading to a show cause notice and subsequent confirmation of demand, interest, and penalty by the Commissioner.

The core issue was whether the grey fabric manufactured by the appellant and sent to job workers should be considered intermediate goods under Rule 16(B). Referring to precedents like M/s. Valentino Syntex Pvt. Ltd. case and Sangam Spinners case, the Tribunal held that grey fabrics produced from duty paid yarn and cleared for further processing can be treated as intermediate goods under Rule 16(B). Therefore, the appeal of the appellant was allowed based on established jurisprudence.

Additionally, the appellant argued that since the Commissioner's permission under Rule 16(B) was still valid, the Revenue could not challenge it, citing precedents like Maruti Udyog Ltd. case and CCE vs. TISCO case. The appellant also emphasized that the duty paid on yarn by the job worker was available as credit for the appellant, ensuring a revenue-neutral position as the duty paid on grey fabrics by the appellant was offset by the duty credit available. This argument further supported the Tribunal's decision to set aside the impugned orders and allow the appeal with consequential relief to the appellant.

In conclusion, the Tribunal's analysis focused on the interpretation of Rule 16(B) in treating grey fabrics as intermediate goods, supported by legal precedents and arguments regarding the validity of Commissioner's permission and revenue neutrality, resulting in the favorable outcome for the appellant.