Good cleared to job worker without payment of duty - SSI exemption under Notification No. 16/97

PJ/Case Laws/2011-12/1341

Case: COMMISSIONER Versus LIBRA STEELS (P) LTD.

Citation: 2011 (271) E.L.T. 177 (Ker.)

Issue:- Good cleared to job worker without payment of duty – principal assessee claiming SSI exemption under Notification No. 16/97 on clearance of job work done products – Matter remanded for deciding responsibility of principal to pay duty on clearances.

Brief Facts:- Respondent were making steel ingots in their plant and were supplying the same to job worker, namely, M/s. Palakkad Steels, for conversion of steel ignots into re-rolled products and for returning re-rolled products to the respondent. After their return, Respondent cleared the same from their factory. Even though duty was payable by the manufacturer on these re-rolled products yet they cleared the same claiming the exemption under notification 214/86. But he cleared ingots to the job worker in terms of Rule 57F(3) of the Central Excise Rules without payment of duty on the ground that if there is duty liability on the final product, respondent will pay the same.

However, when the re-rolled products were received back and cleared by the respondent, they claimed the benefit of Notification No. 16/97, which provides for exemption to SSI units. Since respondent was not engaged in the manufacture of the items cleared, duty was demanded on the final product by disallowing exemption under Notification No. 16/97.

The demand of duty was confirmed by the Authorities below. However, the Tribunal reversed the same and cancelled the demand. Against the impugned order, Revenue has filed this appeal in High Court.

Reasoning of Judgment:- The High Court held that a perusal of the Tribunal's order, it was found that the Tribunal had committed a basic error in assuming that the duty demanded is on the ingots removed to the job worker.

On the other hand, from the orders of the Adjudicating Authority and the First Appellate Authority, it was found that demand is raised on re-rolled products cleared by respondent. Since respondent was manufacturer of steel ingots and not the manufacturer of re-rolled products, they were not found to be eligible for the SSI exemption claimed under Notification No. 16/97.

It was noted that the Tribunal has relied on several decisions of the other Tribunals in canceling the demand of duty. Moreover, the Tribunal has only considered the exemption available on job worker under Notification No. 214/86, whereas the exemption claimed and disallowed in respondent's case is under Notification No. 16/97. Since Tribunal has not considered respondent's liability in payment of duty on the re-rolled products, but has decided the appeal by treating the demand as one pertaining to clearances of ingots, the High Court set aside the order of the Tribunal and restores the appeal back to the Tribunal for fresh decision.

Decision:- Appeal allowed by way of remand.
Comment:- The exemption to principal manufacturer is denied under SSI exemption by saying that the product is not manufactured by him and hence the SSI exemption is not available to him. But the tribunal thought that the demand is given on clearance of SS ingots to job worker and benefit of job work exemption notification 214/86 is being denied. But the demand was relating to denial of SSI exemption and that too on SS rolled products and not on SS ingots. Thus, the tribunal did not understand the complete demand and the same is liable to be set aside.

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PJ/Case Laws/2011-12/1341

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