2007 (11) TMI 68 - AT - Central Excise

Non-payment of duty by principal manufacturer on job-worked goods Demand, interest & penalty raised on job worker is unjustified as he has duly complied with procedural requirements of relevant Not. 214/06 Interest can be raised on principle manufacturer only for belatedly payment of duty

Summary

Issues:
Job work under Notification No.214/86-CE, demand of duty, interest, penalties, appeal against original authority's decision.

Analysis:
1. The appellants undertook job work for a principal manufacturer, receiving inputs and returning processed goods without paying duty under Notification No.214/86-CE. The department issued a show-cause notice denying the benefit of the notification, demanding duty, interest under Section 11 AB, and penalties. The original authority confirmed the duty demand, interest, and imposed penalties. The Commissioner (Appeals) dismissed the appeal, leading to the present appeal by the job worker.

2. The appellants argued compliance with procedural requirements under Notification No.214/86-CE and that the principal manufacturer belatedly paid duty on the job-worked goods. The appellants contended that any interest demand should be on the principal manufacturer, not them. The ld. SDR reiterated the impugned order's findings.

3. The job worker received inputs under Rule 57 F(4) challans, processed goods, and returned them to the principal manufacturer under Notification No.214/86-CE. The principal manufacturer did not pay duty initially but paid after departmental intervention. The delay in duty payment by the principal manufacturer should have been condoned. The demand of interest on the job worker was not sustainable as the principal manufacturer paid duty under Notification No.214/86-CE.

4. The Revenue could not demand interest from the job worker after accepting duty payment by the principal manufacturer. The appeal succeeded as the demands of interest and duty against the job worker were unsustainable based on the case facts. The impugned order was set aside, and the appeal was allowed.

This judgment highlights the importance of procedural compliance under relevant notifications, the liability for duty payment, and the Revenue's limitations in demanding interest from parties.