2011 (8) TMI 621 - HC - Central Excise

Appellant liable for duty payment on Modular Terminal Rosset units; appeal dismissed.

The court upheld the appellant's liability to pay duty on Modular Terminal Rosset (MTR) units sold, emphasizing that the appellant, by availing duty ... Assessee manufacturer of Telephone and Modular Terminal Rosset (MTR) which are connectors and help in operation of MTR - Telephone manufactured by themselves and MTR from SSI - Appellant transfers raw material to SSI which are used in manufacture of MTR under job work challan 57F(4)- SSI cleared good without duty as credit on input goods availed by appellant and similarly liability to pay duty - Assessee failed to discharge duty - After two years credit was reversed and assessee denied interest liability on the ground that he was not liable to duty of excise - Held That:- Tribunal rightly held that the MTRs do not constitute an integral part of the telephone, but are accessories on which duty is payable on clearance made by the appellant. Since appellant has availed duty credit on the inputs purchased and transferred to job workers for manufacture, appellant has to necessarily pay duty on the MTRs sold and adjust duty credit availed on the components by following Rule 57A extracted above.Appeal challenging the demand of duty is dismissed. Issues:1. Appellant's liability to pay duty on Modular Terminal Rosset (MTR) units.2. Reversal of duty credit availed on inputs purchased and transferred to job workers.3. Applicability of Rule 57F(2) of the Central Excise Rules.4. Interpretation of Rule 57A regarding duty credit adjustment.Issue 1: Appellant's liability to pay duty on MTR units:The appellant, engaged in manufacturing and selling telephone instruments along with MTR units, claimed duty credit on components purchased for MTRs under Rule 57F(2) of the Central Excise Rules. Despite availing duty credit and selling the MTR units, the appellant contended they were not liable for duty as they were not the manufacturer. However, the Assessing Officer held that the appellant, by following the prescribed procedure and availing duty credit, was indeed liable for duty. The court upheld this view, stating that the appellant declared itself as the principal manufacturer by adopting Rule 57F, making it responsible for paying duty on the MTR units sold.Issue 2: Reversal of duty credit on inputs:The appellant attempted to absolve themselves from duty payment by belatedly reversing the duty credit availed on inputs. However, the court held that this reversal did not exempt the appellant from duty liability, as the original procedure followed under Rule 57F(2) was irreversible. The court emphasized that duty credit on inputs is meant for adjusting duty payable on the final product, necessitating the appellant to pay duty on the MTR units sold.Issue 3: Applicability of Rule 57F(2):The appellant's reliance on various court decisions to argue against duty liability was countered by the court's observation that the appellant's adoption of Rule 57F(2) established them as the principal manufacturer, responsible for paying duty on the MTR units. The court emphasized that the duty credit availed on inputs must be adjusted against duty payable on the final product, as mandated by Rule 57A.Issue 4: Interpretation of Rule 57A regarding duty credit adjustment:The court interpreted Rule 57A to clarify that duty credit on inputs is intended for offsetting duty payable on the final product. Despite the appellant's reversal of duty credit, the court maintained that the appellant must pay duty on the MTR units and can adjust the duty credit availed on components against this duty. The court dismissed the appeal challenging the duty demand but allowed the appellant to reverse the reversals made to set off duty credit against duty payable on MTR units.In conclusion, the court affirmed the appellant's liability to pay duty on the MTR units sold, emphasizing the irreversible nature of the procedure followed under Rule 57F(2) and the requirement to adjust duty credit against duty payable on the final product.