2015 (4) TMI 1027 - AT - Central Excise

Manufacturer denied duty exemption due to principal's use for products at nil duty rate. Deposit required.

M/s. Singla Polymers Versus C.C.E. Delhi-III

The Tribunal held that the appellant, a manufacturer of rubber compound, was not eligible for duty exemption under a job work basis due to the principal ... Waiver of pre deposit - exemption under notification no. 214/86-CE - Held that:- Appellant manufacture rubber compound on job work basis for M/s Birla Tyres, Haridwar, out of the raw materials received by them and were availing the exemption under notification no. 214/86-CE. This exemption notification is available to the job worker on the basis of a declaration made by him that the goods manufactured by him and cleared to the principal manufacture would be used by the principal manufacturer in the manufacture of finished product which would be cleared on payment of duty. In this case, there is no dispute that the principal manufacturer M/s Birla Tyres were availing of full duty exemption under notification no. 50/03-CE and accordingly, the final product manufactured by them by using the rubber compound were being cleared at nil rate of duty. In view of this, were are of the prima facie view that the appellant would not be eligible for exemption notification no. 214/86 and as such do not have prima facie case in their favour. - Partial stay granted. Issues:Interpretation of duty exemption notifications under central excise law for job work basis manufacturing and clearance of rubber compound to principal manufacturer.Analysis:The case involved a dispute regarding the liability of the appellant, a manufacturer of rubber compound, for payment of duty on consignments of rubber compound cleared to a principal manufacturer. The appellant received raw materials from the principal manufacturer for making rubber compound on a job work basis and returned the manufactured rubber compound without duty payment under a duty exemption notification. The principal manufacturer used the rubber compound to manufacture finished products cleared at nil rate of duty under a separate notification. The Department contended that since the principal manufacturer availed full duty exemption for the finished products, the appellant was not eligible for the job work exemption. The Commissioner confirmed a duty demand against the appellant, along with interest and penalty. The appellant filed an appeal challenging this order.The appellant failed to appear during the proceedings despite timely notice, leading to the decision on the stay application being made ex-parte. The Department opposed the stay application, arguing that the appellant did not have a prima facie case in their favor due to the usage of the rubber compound by the principal manufacturer for finished products cleared at nil duty rate. The Department reiterated the Commissioner's findings to support its stance.After considering the submissions and case records, the Tribunal observed that the appellant manufactured rubber compound on a job work basis for the principal manufacturer, who availed full duty exemption for the finished products. The Tribunal held that the appellant, therefore, was not eligible for the job work exemption under the relevant notification. As a result, the Tribunal directed the appellant to deposit a specified amount within a stipulated timeframe. Upon compliance with this directive, the balance duty demand, interest, and penalty requirements would be waived, and recovery stayed.In conclusion, the Tribunal found that the appellant was not entitled to the duty exemption under the job work basis due to the principal manufacturer's utilization of the rubber compound for finished products cleared at nil duty rate. The decision required the appellant to make a deposit within a specified period to avail of the waiver on the remaining duty, interest, and penalty amounts.