Appellant exempt from duty on yarn for job worker under Rule 16B. Cenvat credit allowed.

The appellant was not required to pay duty on yarn cleared to the job worker under Rule 16B. The Tribunal found that the Commissioner's permission for yarn removal satisfied Rule 16B conditions, allowing manufacturers to remove excisable goods for processing without duty payment. The appellants were entitled to Cenvat credit for any duty paid, resulting in a revenue-neutral outcome. The impugned order was set aside, and the appeal was allowed in favor of the appellants.

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Issues:
1. Whether the appellant was required to pay duty on yarn cleared to the job worker under Rule 16B.

Analysis:
1. The judgment revolves around the appellant engaged in manufacturing yarn from fiber, clearing it to a job worker for conversion into fabric, and receiving the fabric back for further clearance. The Revenue contended that yarn is not an intermediate product, thus not covered under Rule 16B for duty payment. Despite Commissioner's permission, duty demand was raised on the cleared yarn.

2. The crucial question was whether duty payment on the cleared yarn was necessary as per Rule 16B and the Commissioner's permission. Rule 16B allows manufacturers to remove semi-finished excisable goods for processing elsewhere without duty payment. The Commissioner had granted permission for yarn removal, satisfying Rule 16B conditions. The Tribunal's precedent in Valentino Syntex Pvt. Ltd. v. CCE, Jaipur supported this interpretation, where a similar situation was deemed compliant with Rule 16B.

3. Furthermore, even if duty was payable on the cleared yarn, the appellants were entitled to Cenvat credit for the duty paid. This credit could offset duty liabilities on the fabric received back from the job worker, resulting in a revenue-neutral scenario. Consequently, the impugned order was set aside, and the appeal was allowed with relief for the appellants.

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