Liability to pay duty on clearance of POY without duty for job work U/Notf. No. 214/86-CE

PJ/Case Laws/2011-12/1425

Case: COMMISSIONER OF C. EX. & CUS. v/s RAPIER MACHINERY MFG. CO. (INDIA) PVT. LTD

Citation: 2011(269) E.L.T. 451 (Guj.)

Issue:- Clearance of POY without payment of duty for job work when POY excluded from Notification No. 214/86-CE – whether the job worker liable to pay duty?

Brief Facts:- Shri Hari Textiles Pvt. Ltd. (M/s Hari) is engaged in manufacture of Polyester Texturised Yarn and Grey Fabrics falling under Chapter No. 54&58 of the Central Excise Tariff Act, 1985. They had manufactured and cleared polyester textured yarn classified under chapter 5402.32 of Central Excise Tariff Act, 1985 on job work, to Respondent-assessee without payment of duty of excise and without preparing and issuing central excise invoice upto 23.11.2004.

By virtue of budgetary changes made in the financial year 2004-05, the manufacture of filament yarn classified under Chapter 5402.32 of Central Excise Tariff, on job work had been excluded from the purview of Notification no. 214/86-C.E.as amended by Notification No. 26/2004-C.E., dated 9-7-2004.

Despite the fact that manufacture and clearance without payment of duty on such polyester textured yarn classifiable under Chapter Heading No. 5402 was not permissible under the Central Excise Act, 1994 and Notifications issued there under, M/s. Hari was receiving POY, on job work, for texturing the same and polyester textured manufactured out of the said POY was cleared by M/s. Hari to Respondent without payment of duty due thereon and without issuance of central excise invoices. Respondent had sent POY to M/s Hari for conversion into Polyester textured Yarn on job work basis under Challans as per Rule 4(5)(a) of the Cenvat Credit Rules, 2002/2004 and received back the Polyester textured Yarn without cover of invoices and without payment of duty. Respondent adopted this practice till 17.11.2004 and thereafter, polyester textured yarn was received from M/s Hari under cover of invoices on payment of duty.

Show cause notice was issued to M/s Hari proposing to recover duty as well as proposing penalty against other respondents under Rule 26 of the Central Excise Rules, 2002. Demand was confirmed by the Commissioner and penalty was imposed.

In appeal, the Tribunal has allowed the appeals and granted consequential relief to the respondents. It was held that Rule 4(5) (a) of the Rules provides for facility of exemption from payment of duty on the goods at the time of clearance from the job worker’s premises even in absence of corresponding exemption notification exempting such goods from payment of duty on clearance from factory gate. On facts, it was held that the requirements of provisions of Eule 4 (5) (a) of CCR, 2004 were duly fulfilled.

Subsequently, respondents moved an application for rectification of mistake which was allowed.

Against the order of the Tribunal, Revenue is in appeal before the High Court.

Appellant’s Contention:- Revenue has submitted that the Tribunal has erred in comparing Notification No. 214/86-CE with procedure of Rule 4(5)(a) of the Cenvat Credit Rules, 2002, holding that the same are similar and not different from each other, inasmuch as both these notification and rules allowed movement of goods for job work. It is submitted that the scope of both the provision is totally different inasmuch as Notification No. 214/86-CE exempts the job worker from duty liability on job work and allows clearance of goods from the job workers premises without payment of duty. On the other hand, Rule 4(5)(a) allows the principal manufacturer to avail of Cenvat Credit on the inputs sent to the job workers, if the goods are received back in the factory, after job work, within 180 days of their being sent to the job worker. It is submitted that the Tribunal has, without noticing the distinction between the two provisions, blindly followed certain decisions cited on behalf of respondents and has held in favour of the respondents without so much as discussing as to what was the ratio laid down in the said decisions and as to how the same were applicable to the facts of the present case.

Reasoning of Judgment:- The High Court perused the order passed by the Tribunal. It was noted that the Tribunal had observed that the procedure prescribed under Notification No. 214/86 and Rule 4(5)(a) of the Cenvat Credit Rules were not very different from each other, without even adverting to the fact as to at which stage and to whom, Notification No. 214/86 and Rule 4(5)(a) of Cenvat Credit Rules would be applicable. The order of the Tribunal does not reflect as to what was the controversy which the Tribunal was called upon to decide. The Tribunal has not assigned the any reasons as to how the findings and conclusions recorded by the Commissioner are erroneous and has blindly followed the decision cited by the Respondents without so much as considering as to how they were applicable to the facts of the present case.

Reliance was placed on the decision of the Apex Court in the case of Commissioner of Central Excise, Bangalore v/s Srikumar Agencies [2008 (232) ELT 577]. It was held that the Commissioner had given detailed reasons as to why Rule 4(5)(a) would not be attracted insofar as the question as to whether a job worker manufacturer is required to pay any duty or not is concerned.

Impugned order of the Tribunal not giving reasons has been set aside and order of the Commissioner (A) restored.

Decision:- Appeals allowed.

Comment:- Non speaking orders can be set aside. The case laws are not applicable on any case and it has to be discussed and then decided. This is very good decision. Normally, the department authorities do not discuss and differentiate the case laws filed by the manufacturer. This decision is of very helpful for the same.

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PJ/Case Laws/2011-12/1425

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