1999 (2) TMI 199 - AT - Central Excise

Summary

Issues:
1. Confirmation of duty demand and penalty imposition on the appellants.
2. Alleged procedural violation under Rule 57F(2) regarding diversion of consignment for job work.
3. Dispute over the liability for duty payment based on the nature of the transaction and hiring of machinery.
4. Application of the decision in the case of Maschmeijer Aromatics (I) Ltd. v. C.C.E. to the present case.

Confirmation of Duty Demand and Penalty Imposition:
The appeal was against the order confirming a duty demand of Rs. 67,430.95 on the appellants and imposing a penalty of Rs. 700. The Additional Collector of Central Excise had passed the original order, also imposing a penalty on another entity not part of the appeal.

Procedural Violation under Rule 57F(2):
The matter involved the diversion of consignment received by one company for processing under job work to the premises of the present appellants due to a strike at the recipient's factory. The order held that this diversion was not in accordance with Rule 57F(2), leading to the confirmation of duty demand and penalty imposition.

Dispute over Duty Liability:
The appellants argued that they merely hired out their machine on an hourly basis to the company facing a strike, and the processing was done by the personnel of that company. They contended that any excisable goods produced were on the account of the company hiring the machine, not the appellants. They emphasized that the machine was hired on a dry lease system, and therefore, they should not be considered manufacturers liable for duty.

Application of Precedent:
The Tribunal considered the decision in the case of Maschmeijer Aromatics (I) Ltd. v. C.C.E., which held that Modvat Credit should not be denied if inputs are sent out for further processing without permission, as long as the processed inputs are used for the final product. Applying this precedent, the Tribunal found that the appellants had a strong case, as the processing was done on the machine hired out, and the inputs were returned to the original suppliers for further production.

In conclusion, the Tribunal set aside the original order, allowing the appeal and providing consequential relief to the appellants in accordance with the law.