ORDER
P.G. Chacko, Member (J)
1. In the impugned order, the Commissioner confirmed demand of duty of over Rs. 1.2 Crores against M/s. Gayathri Textiles (appellants in appeal No. E/261/2005) for the period April 2002 to March 2003 in adjudication of a show-cause notice (SCN) dated 8.4.2004, which invoked the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act on the basis of alleged suppression of facts etc. He also imposed equal amount of penalty on the said party under Section 11AC of the Act. Penalties of Rs. 1 lakh each were also imposed under Rule 26 of the Central Excise Rules, 2002 on numerous persons (appellants in the remaining appeals). M/s. Gayathri Textiles had, during the above period, received polyester yarn from M/s. Premier Mills Ltd. (manufacturers of processed fabrics, hereinafter referred to as ‘the principal manufacturer’) and processed the same into grey fabrics, on job work basis, and cleared the same, without payment of duty, to the principal manufacturer. The removal of grey fabrics by the job worker to the principal manufacturer was made in terms of Rule 4(5) of the Central Excise Rules, 2002. M/s. Gayathri Textiles had been making similar removals of grey fabrics in the past also, under the erstwhile Rule 57F(3) [renumbered as 57F(4)] of the Central Excise Rules, 1944 and the department had not demanded duty on the grey fabrics so removed. However, in the SCN in question, the department took the stand that no sort of exemption was available to the grey fabrics cleared by M/s. Gayathri Textiles to the principal manufacturer as Notification No. 214/86 was not applicable to textile fabrics. In reply to the notice, the party contested the above stand and also raised alternative plea that they were entitled to claim exemption under Notification No. 14/2002-CE dated 1.3.2002 in terms of the polyester grey fabric as the input (polyester yarn) received by them from the principal manufacturer was non-duty-paid. They also cited a circular of the Board in support of their contention that they were not required to take Central Excise registration. They submitted that, as they had maintained all records as per Rule 4(5)(a) of the Cenvat Credit Rules, 2002, the department’s allegation that they had suppressed/misdeclared facts was not sustainable and, therefore, the larger period of limitation was not invocable against them. Learned Commissioner rejected these arguments and passed the impugned order.
2. After hearing both sides and considering their submissions, we find that the short issue arising for consideration is whether M/s. Gayathri Textiles were liable to pay duty on the grey polyester fabrics manufactured by them as job workers and supplied to the principal manufacturer during the period of dispute. Admittedly, the grey fabrics were removed under the previsions of Rule 4(5)(a) of the Cenvat Credit Rules, 1944. A similar question had arisen before the Tribunal in the case of M. Tex & D.K. Processors (P) Ltd. v. Commissioner 2001 (136) ELT 73 (Tri.-Del.). By a majority decision, the Bench held that duty liability on goods manufactured by a job worker out of inputs (as such or partially processed) on which Modvat credit had been taken by the principal manufacturer, and removed under Rule 57F(4) had to be discharged by the principal manufacturer and not by the job worker. The appeal filed by the department against the Tribunal’s decision in M. Tex case was dismissed by the apex court vide Commissioner v. M. Tex & D.K. Processors (P) Ltd. . The decision in M. Tex case was once again affirmed by the Supreme Court while dismissing another appeal of the department which was filed against the Tribunal’s order in Commissioner v. D.K. Processors (P) Ltd. . Dismissing the said appeal, their lordships passed the following order:
This is a statutory Appeal filed under Section 35L(b) of the Central Excise Act, 1944 (for short, ‘The Act‘) against the Final Order No. 343/2000-D dated 28-9-2000 passed by the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi (for short ‘the Tribunal’) in Appeal No. E/1984/2000D.
The Tribunal, relying upon its own decision in the case of M. Tex and Anr. v. CCE, Jaipur reported in 2001 (136) ELT 73 (Tri.-Del.) : 2000 (39) RLT 1091 (CEGAT) has dismissed the appeal filed by the Revenue. In M. Tex case (supra), Tribunal has taken the view that where the job workers after processing the fabrics received from the principal manufacturer, had returned the same under Rule 57F(3)/57F(4) of the Central Excise Rules, 1944, they will not be liable to pay duty on processed fabrics. This decision of Tribunal has been confirmed by this Court in the case of Commissioner of Central Excise, Jaipur v. M. Tex and Anr. .
Counsel for the appellant fairly concedes that the point involved in the present appeal is concluded by the afore-mentioned judgment of this Court.
In view of the concession made by the counsel appearing for the appellant, this appeal is dismissed in terms of the afore-mentioned judgment of this Court in Commissioner of Central Excise, Jaipur v. M. Tex and Anr. (supra), Parties shall bear their own costs.
We find that the Tribunal’s decisions in the cases of Excel Corrugated Boxes (P) Ltd. v. Commissioner and Trico Process Pvt. Ltd. v. Commissioner also support the case of M/s. Gayathri Textiles. The appellants’ case is also supported by the Tribunal’s decision in Commissioner v. Srikant Fab-Tex (P) Ltd. 2001 (135) ELT 455 (Tri.-Del.), wherein, following M. Tex case, it was held that job worker was not liable to pay duty on fabrics which he, after further processes, returned to the principal manufacturer who cleared the same on payment of duty.
3. Following the case law cited by learned Counsel, we hold that M/s. Gayathri Textiles qua job workers had no liability to pay duty on the grey polyester fabrics supplied to the principal manufacturer during the period of dispute. It becomes unnecessary to examine the alternative claim raised by the party on the strength of Notification No. 14/2002-CE ibid.
4. For the reasons already noted, we set aside the demand of duty raised on M/s. Gayathri Textiles and consequentially the penalty on them is vacated. The primary penalty on the assessee having been set aside, the secondary penalties on the other appellants will also stand vacated. In the result, the impugned order is set aside and all these appeals are allowed.
(Operative part of the order was pronounced in open court on 4.9.06)
