1998 (10) TMI 243 - AT - Central Excise

Summary

Issues:
- Duty demand and penalty imposed by the Collector of Central Excise & Customs
- Classification of goods manufactured by job worker
- Applicability of Trade Notice 98/88
- Invocation of extended period for duty demand
- Modvat benefit availed on inputs
- Small scale exemption entitlement
- Interpretation of Notification 175/86
- Valuation determination for goods sent to job worker
- Excise formalities for goods manufactured under Rule 57F(2)

Analysis:
- The appeal challenges an order confirming a duty demand of Rs.2,24,659/- and a penalty of Rs. 10,000 imposed by the Collector of Central Excise & Customs. The appellants, engaged in manufacturing, sent inputs to a job worker for manufacturing hollow screws used in final products. The department issued a show cause notice for duty demand under Section 11A, alleging non-compliance with excise formalities and duty payment on the manufactured goods.

- The appellant contests the Collector's findings, citing Trade Notice 98/88 to support their position that goods manufactured by the job worker should not be treated as the appellant's manufacture. The appellant argues for Modvat benefit on inputs and challenges the invocation of the extended period for duty demand. The respondent relies on Notification 305/77 to counter the appellant's claims regarding small scale exemption and Modvat entitlement.

- The Show Cause Notice highlights the failure to classify, price, account, and pay duty on the hollow screws manufactured by the job worker. The appellant justifies the actions based on the screws being designed for injectors and procured without Modvat credit. The appellant also disputes the imposition of penalty, claiming a lack of mens rea and emphasizing the job worker's independence in availing Modvat exemption.

- The Tribunal examines the submissions and references the Ujagar Prints case to address the valuation of goods sent to job workers. It emphasizes that goods manufactured under Rule 57F(2) are not bought-out articles, and the job worker's role does not necessitate excise formalities or duty payment. The Tribunal finds the Collector's approach flawed, noting the Trade Notice's provisions on small scale exemption and principal manufacturer's entitlement to Modvat credits.

- Ultimately, the Tribunal accepts the appeal, setting aside the Collector's order and allowing consequential relief. The judgment clarifies the misinterpretation of excise formalities for goods manufactured under Rule 57F(2) and upholds the appellant's position regarding Modvat entitlement and small scale exemption under relevant notifications.