2009 (6) TMI 841 - AT - Central Excise

Summary

Issues:
- Interpretation of Notification No. 214/86-C.E.
- Allegation of being the real manufacturers of intermediate goods.
- Liability to pay Central Excise duty on intermediate goods.
- Applicability of Notification No. 10/96-C.E.
- Duty demand and penalty on the Appellants.

Interpretation of Notification No. 214/86-C.E.:
The Appellants sent raw materials to job-workers without taking Modvat/CENVAT Credit, receiving intermediate goods back for manufacturing exempted footwear. The Department demanded duty under Notification No. 214/86-C.E., alleging the Appellants' status as real manufacturers. The Appellants argued they did not need to follow the Notification's procedure as they did not take credit and the finished goods were not dutiable. The Tribunal found the Notification inapplicable as the finished goods were exempted footwear, setting aside the demand and penalty.

Allegation of being the real manufacturers of intermediate goods:
The Department claimed the Appellants were actual manufacturers of intermediates, contrary to the Notification's premise that job-workers are the manufacturers. The Tribunal noted the absence of such an allegation in the show cause notice, denying the Appellants a chance to defend. Without proof of an undertaking by the Appellants to pay duty for job-workers, the Tribunal dismissed the claim that the Appellants were real manufacturers, as the Notification shifts duty payment to principals for dutiable goods.

Liability to pay Central Excise duty on intermediate goods:
The Department argued the Appellants supervised job-workers closely, specifying production, making them liable for duty on intermediates. However, the Tribunal found no evidence of an undertaking by the Appellants to pay duty on behalf of job-workers. As the intermediates were used for exempted footwear and no duty demand was made on job-workers, the Tribunal ruled the duty demand and penalty on the Appellants unsustainable, following precedent decisions.

Applicability of Notification No. 10/96-C.E.:
The Appellants contended that the intermediates used by job-workers for exempted footwear were exempt under Notification No. 10/96-C.E. The Tribunal acknowledged this argument but refrained from delving into it, as there was no duty demand on job-workers. The Tribunal held that since the Appellants did not undertake duty liability for job-workers, they could not be held responsible for duty on intermediates.

Duty demand and penalty on the Appellants:
Ultimately, the Tribunal ruled in favor of the Appellants, setting aside the impugned order and allowing the appeal. The Tribunal emphasized that without an undertaking by the Appellants to discharge duty liability for job-workers, and considering they were not the manufacturers of intermediate goods, the duty demand and penalty on the Appellants could not be upheld. The decision was based on previous Tribunal rulings and the specific circumstances of the case.