2017 (2) TMI 480 - AT - Central Excise

Intermediate goods - job-work - supply of the intermediate goods to the job worker and manufacturing by job worker - whether the appellant is required to make payment of duty on clearance of intermediate products to job-worker? - Rule 57F (2/4) of Central Excise Rules 1944 and/or notification No. 214/86-CE - Held that - The only condition is that the final product is cleared by the principal manufacturer on payment of excise duty. In such case neither excise duty is payable on the removal of semi processed goods by the principal supplier nor on the job work goods manufactured by job worker. In the present case, the appellant has claimed that they have cleared the trade rubber on payment of duty. We find that the adjudicating authority has not verified any of the documents such as challans issued by the M/s. Emkay for sending of rubber compound/cushion rubber for job work to Kayji and the challans of Kayji for return of job work goods to M/s. Emkay and final clearance of the same on payment of duty by M/s. Emkay. This co-relation has to be verified by the adjudicating authority which was not done so - since the Tribunal had directed to the adjudicating authority to verify the documents and statements than the adjudicating authority should not have avoided such exercise on one or other pretext - appeal allowed by way of remand.

Issues involved:
1. Demand of duty on manufacturing and clearance of rubber products without payment.
2. Interpretation of job work transaction and duty liability.
3. Compliance with prescribed procedures under Central Excise Rules.
4. Verification of documents and statements for duty determination.

Analysis:

Issue 1: Demand of duty on manufacturing and clearance of rubber products without payment
The case involved two appellants, M/s. Emkay Elastomers and M/s. Kayji Polymers, who were alleged to have manufactured and cleared rubber products without paying duty. The adjudicating authority confirmed the duty demand and penalties, leading to appeals before the Tribunal. The Tribunal considered the transaction as supply of intermediate goods to a job worker and manufacturing by the job worker, with duty paid on the final product. The matter was remanded to verify the job work transaction, but the duty demand was confirmed again, leading to the second round of appeals.

Issue 2: Interpretation of job work transaction and duty liability
The appellant argued that the entire transaction was covered under the job work procedure, even though proper procedures like intimation to the department and issuance of prescribed challan were not followed. They contended that duty paid on the final product exempted them from further duty demands. The Revenue, however, insisted on duty payment at every manufacturing stage due to non-compliance with prescribed procedures. The Tribunal emphasized the need to verify the job work transaction based on documents and statements submitted by the appellants.

Issue 3: Compliance with prescribed procedures under Central Excise Rules
The Tribunal highlighted the importance of following prescribed procedures under Central Excise Rules, such as Rule 57F, for availing exemptions or benefits. While acknowledging procedural lapses in the case, the Tribunal focused on the substantive compliance with duty payment on the final product to determine duty liability.

Issue 4: Verification of documents and statements for duty determination
The Tribunal criticized the adjudicating authority for not adequately verifying the documents and statements related to the job work transaction. Emphasizing the need for a thorough examination of challans and records to establish the movement of goods and duty payments, the Tribunal directed the adjudicating authority to conduct a de novo adjudication considering all documents and statements provided by the appellants. The appellants were granted a personal hearing opportunity, and the adjudicating authority was instructed to pass a reasoned order within three months.

In conclusion, the appeals were allowed by remanding the matter to the adjudicating authority for a comprehensive verification of documents and statements to determine duty liability based on the job work transaction and duty payment on the final product.

← Previous Next →