2007 (8) TMI 133 - AT - Central Excise

Tribunal grants relief, overturns Orders-in-Appeal, allows modvat credit, citing lack of intent.

The Tribunal ruled in favor of the appellants, setting aside the Orders-in-Appeal and providing relief due to the absence of justification for denying ... demand –Job worker cleared the goods to principal manufacture after processing by payment of duty by availing modvat credit available on inputs but revenue contended that modvat credit not available to job worker for payment of duty under Rule 96E CER,1944 – Intention to evade payment not proved and demand set aside Issues:Appeal against Orders-in-Appeals No. 10 and 11/2006(T) - C.E. dated 15-2-2006 passed by the Commissioner of Customs & Central Excise (Appeals), Guntur.Analysis:The case involved two appellants, M/s. Super Spinning Mills Ltd. and M/s. Standard General Finance Ltd. The first appellant cleared Single Yarn to the second appellant for doubling processes. The second appellant, an independent manufacturer of Cotton Yarn, undertook the doubling process and cleared the yarn after payment of duty using modvat credit. Revenue contended that the final product was exempted, so modvat credit couldn't be availed, and duty was demanded from both appellants. The duty demand on the first appellant was Rs. 12,77,860/-, and on the second appellant was Rs. 2,49,435/- with penalties imposed. The Commissioner (Appeals) upheld the duty demands. Both sides were represented by advocates, and the appellants argued that the job worker had the option to avail any exemption notification, citing relevant case laws.The appellants argued that the job worker's choice to pay duty on finished products should not justify denying credit, supported by case laws. The Tribunal noted that the job worker had discharged the duty liability on the finished goods, and Rule 96(E) did not obligate the principal manufacturer to discharge the duty liability. As long as duty on the double yarn by the job worker was paid, Revenue should not object. The Tribunal found no justification for duty demands on the first appellant since the second appellant had already paid the duty. It was established that the job worker's process amounted to manufacture, allowing duty liability to be discharged from available modvat credit on inputs. Denial of modvat credit and invocation of the longer period were deemed unjustified. The Tribunal concluded that there was no intention to evade duty, especially when duty had been paid, and set aside the Orders-in-Appeal, allowing the appeals with any consequential relief.In conclusion, the Tribunal ruled in favor of the appellants, setting aside the Orders-in-Appeal and providing relief due to the absence of justification for denying modvat credit and invoking the longer period, given the duty payment and lack of intent to evade duty.