Intermediate goods under Rule 16(B) for grey fabrics cleared to job workers, supported by subsisting permission and revenue neutrality.

Grey fabrics made from duty-paid yarn and cleared to job workers for further processing were treated as intermediate goods under Rule 16(B), following earlier Tribunal authority and the assessee's own prior case. The subsisting permission granted by the jurisdictional Commissioner supported this treatment, because the Revenue could not act contrary to an unwithdrawn authorisation. The transaction was also revenue neutral, as duty paid at one stage remained available as credit at the next. On these grounds, the demand for duty, interest, and penalty was set aside and the assessee's appeal succeeded with consequential relief.

---

---

Issues: (i) Whether grey fabrics manufactured from duty-paid yarn and cleared to job workers for further processing could be treated as intermediate goods so as to attract Rule 16(B); (ii) Whether the existing permission granted by the jurisdictional Commissioner and the revenue-neutral character of the transaction supported the assessee's case.

Issue (i): Whether grey fabrics manufactured from duty-paid yarn and cleared to job workers for further processing could be treated as intermediate goods so as to attract Rule 16(B).

Analysis: The disputed question was covered by earlier Tribunal decisions holding that grey fabric manufactured out of duty-paid yarn, sent to a job worker for processing, and later received back or cleared on payment of duty, is eligible for treatment as intermediate goods for purposes of Rule 16(B). The cited line of authority had already accepted this mode of clearance and was followed in the assessee's own earlier case.

Conclusion: The grey fabrics were rightly treated as intermediate goods, and the demand could not be sustained on this issue.

Issue (ii): Whether the existing permission granted by the jurisdictional Commissioner and the revenue-neutral character of the transaction supported the assessee's case.

Analysis: The permission granted under Rule 16(B) had not been withdrawn, and the Revenue could not proceed contrary to that subsisting permission. The movement of credit from the duty-paid yarn stage to the grey fabric stage also left the exercise revenue neutral, since duty paid at one stage remained available as credit at the next stage.

Conclusion: These additional grounds also supported the assessee and negatived the Revenue's objection.

Final Conclusion: The impugned order confirming duty, interest, and penalty was set aside and the assessee's appeal succeeded with consequential relief.

Ratio Decidendi: Where grey fabrics manufactured from duty-paid yarn are cleared to job workers for processing and the statutory permission for such clearances subsists, the goods may be treated as intermediate goods under Rule 16(B), particularly when the transaction is revenue neutral.

---