1997 (6) TMI 36 - AT - Central Excise

Summary

Issues Involved:
1. Whether Nylon Filament Yarn (POY) are finished goods or semi-finished goods.
2. Whether permission under Rule 56B can be given for "in bond" removal of POY.

Issue-wise Detailed Analysis:

1. Whether Nylon Filament Yarn (POY) are finished goods or semi-finished goods:

The Tribunal examined whether POY could be considered semi-finished goods eligible for removal without payment of duty under Rule 56B. The Assistant Collector initially rejected the application, stating that Nylon Filament Yarn (Flat Yarn) was not semi-finished. The Collector (Appeals) later allowed the appeal, treating POY as semi-finished goods when used for texturizing. The appellant contended that POY is a finished product and cannot be considered semi-finished merely because it undergoes further processing. The Tribunal referred to various judgments, including the High Court of Allahabad in Lohia Machines Ltd. v. Union of India, which held that POY is a distinct, marketable product and not semi-finished goods. The Tribunal concluded that POY, being a marketable product, does not qualify as semi-finished goods under Rule 56B.

2. Whether permission under Rule 56B can be given for "in bond" removal of POY:

The Tribunal analyzed whether Rule 56B permits the removal of POY without payment of duty for further processing. The Assistant Collector had rejected the application, stating that Rule 56B does not allow removal of goods considered finished for further manufacturing processes. The Collector (Appeals) had allowed the removal, interpreting Rule 56B as applicable to semi-finished goods requiring further processing, such as texturizing. The appellant argued that Rule 56B should be read in conjunction with Rules 9 and 49, which mandate duty payment on excisable goods even if removed within the factory for further manufacturing. The Tribunal considered the judgment of the High Court of Allahabad, which held that Rule 56B applies only to semi-finished goods and does not defer duty on POY until texturization. The Tribunal concluded that Rule 56B does not permit the removal of POY without payment of duty, as POY is not semi-finished goods.

Conclusion:

The Tribunal set aside the order of the Collector (Appeals) and restored the order of the Assistant Collector, holding that POY is a finished product and not eligible for removal without payment of duty under Rule 56B. The Tribunal emphasized that Rule 56B applies only to semi-finished goods and does not defer duty on marketable products like POY.