2009 (6) TMI 274 - AT - Central Excise

The appellants were manufacturing Polyester Texturised Yarn (PTY) by utilizing the raw materials supplied on job work basis and for this purpose, they were availing benefit of Cenvat Credit under Cenvat Credit Rules, 2002/2004 (hereinafter referred to as CCR). In the impugned order, it has been held that Notification No. 214/86-C.E., dated 25-3-1986 had excluded the filament yarn from the purview of the said Notification. - There is no dispute that the raw materials were sent under challan and finished products were returned to the principal. There is also no dispute that the principal had paid duty on the finished product. In these circumstances, the requirement of provisions of Rule 4(5)(a) of CCR have not been fulfilled - Tribunal in case of CCE, Vapi v. Sunflag Filaments Ltd. clearly observed that in the absence of amendment of Rule 4(5)(a) of CCR, which excluded PTY from following the procedure, the assessee cannot be prevented from availing this facility and, therefore, the clearance cannot be held as irregular. Hence no duty payable, confiscation and penalty set aside

Summary

Issues:
Interpretation of Notification No. 214/86-C.E. regarding exclusion of filament yarn, eligibility of Polyester Texturised Yarn (PTY) for Cenvat Credit, applicability of Rule 4(5)(a) of Cenvat Credit Rules, imposition of duty, penalty under Central Excise Rules, 2002.

Analysis:
The judgment by the Appellate Tribunal CESTAT Ahmedabad involved a dispute concerning the manufacturing of Polyester Texturised Yarn (PTY) utilizing raw materials supplied on job work basis. The issue revolved around the interpretation of Notification No. 214/86-C.E., which was held to exclude filament yarn from its purview. The impugned order demanded duty payment and imposed penalties under Central Excise Rules, 2002. The appellant argued that PTY clearance under Rule 4(5)(a) of Cenvat Credit Rules, as amended, remains eligible for Cenvat Credit despite the exclusion under the notification. The appellant cited various precedents supporting their claim, emphasizing that the clearances under the amended rule cannot be deemed irregular.

The Tribunal examined the submissions and records, noting that the manufacturing process followed by the appellants aligned with the procedures under CCR. Despite the exclusion of PTY under the notification, the Tribunal found no substantial difference between the prescribed procedures. It was established that the raw materials were sent under challan, with finished products returned to the principal who had paid the duty. Relying on precedents like the case of Sunflag Filaments Ltd., the Tribunal concluded that in the absence of an amendment excluding PTY from following the prescribed procedure, the appellants could avail the facility without irregularity.

Consequently, the Tribunal ruled in favor of the appellants, holding the clearance of PTY as regular. As no duty was deemed payable, the penalties imposed were set aside along with any confiscation. The appeals were allowed, providing consequential relief to the appellants. The judgment emphasized adherence to the relevant provisions and established precedents in determining the eligibility for Cenvat Credit and the regularity of clearances under the amended rules.

End of Analysis