2024 (11) TMI 1341 - AT - Central Excise

Liability of Appellant to pay Central Excise duty on pre-budgeted stock of branded garments lying in its godown after it has been made taxable by N/N. 12/2011 dated 01.03.2011 - HELD THAT - The brand names were put by the job-workers and not by the Appellant on the garments manufactured and cleared at the job workers end. For excise taxable events it is manufacturing itself that would determine the taxability but duty can be levied and collected at a later stage for convenience of administration and removal can be made taxable event in terms of Rule -9A of Central Excise Rules, 1944. It would be worthwhile to mention that Rule 9-A that was meant for determination of the date of duty and tariff valuation has been deleted from the statute book since 2001 with introduction of New Central Excise Rules in place of old Rules of 1944 and therefore, by invoking the same, duty liability cannot be fastened on the Appellant on the basis of removal of goods from godown when these were already cleared upon payment of NIL rate of duty prevailing then. The impugned order is set aside - appeal allowed.

Summary

Issues:
Legality of order confirming liability to pay Central Excise duty on pre-budgeted stock of branded garments.

Analysis:
The case involved a dispute regarding the liability of the Appellant to pay Central Excise duty on pre-budgeted stock of branded garments following a notification making such goods taxable. The Appellant owned the brand name 'TEXAS' for goods under Chapter 62, which were initially exempted but later made taxable by a notification. The Appellant had pre-budgeted stocks cleared prior to the taxable status. The issue arose when a show-cause notice was issued demanding duty on these stocks, which were subsequently cleared at a 'Nil' rate of duty. The Commissioner (Appeals) confirmed the duty demand, leading to the appeal.

During the appeal, the Appellant's counsel argued that a misspelling in a letter led to a misunderstanding regarding the branding of the goods, emphasizing that the branding was done before clearance by job-workers. The Commissioner (Appeals) held that the Appellant affixed the brand name after receiving the goods without a brand, making them liable for duty. However, the Tribunal found that the brand names were put by the job-workers, not the Appellant, on the garments, and no further processing was carried out by the Appellant after branding.

The Tribunal also noted the Commissioner (Appeals) referencing a Supreme Court judgment to justify duty liability based on the date of removal of goods. However, Rule 9-A, which determined duty and tariff valuation, had been deleted since 2001. Therefore, duty liability could not be imposed based on the removal of goods when they were already cleared at a 'Nil' rate of duty. The Tribunal allowed the appeal, setting aside the Commissioner (Appeals) order with consequential relief.

In conclusion, the Tribunal ruled in favor of the Appellant, highlighting that duty liability could not be imposed based on the removal of goods when they were cleared at a 'Nil' rate of duty, especially considering the deletion of Rule 9-A from the statute book. The judgment provided clarity on the branding process and the timing of duty liability, ultimately leading to the setting aside of the Commissioner (Appeals) order.