Full Judgment
The dispute relates to the reversal of modvat credit taken in respect of certain chemicals part of which were used in making certain components on job work basis and supplied to the principal manufacturer viz., M/s. Mattel Toys Ltd., in terms of Rule 57F (3) of the Central Excise Rules, 1944. The Assistant Commissioner-in-charge considered the issue and held that, the Rule 57CC, under which reversal of credit amounting to 8% of the price of the toys components, cleared from the respondents premises, is not required since the said Rule talks about the final products, which are chargeable to duty and those final products which are not chargeable to duty, being manufactured by the same manufacturer. The adjudicating authority observed that in the instant case the situation is very different. The assessee is carrying out only job work of plating the toy components supplied by M/s. Mattel Toys Ltd., and after completion of the job work, these components are returned to M/s. Mattel Toys Ltd. Thus, there is no sale of any final products, not chargeable to duty, by the assessee.
2. In the grounds of appeal from the Revenue, it has been claimed that the judgment of the CEGAT in the case of M/s. Belarus Industries Ltd., vide Order No.C-II/1921/WZB/2001 dated..20/07/2001 is wrongly applied.
Since in the instant case the transaction is between two different entities whereas in the Ballarpur Industries Ltd., case it was mere transfer from one unit to another, Therefore, in this case a sale was involved and CEGAT judgment was not applicable.
4. So far as the argument regarding the applicability of the provisions of Rule 57CC is concerned, I note that the activity of galvanizing undertaken on the components received by the respondents from M/s.
Mattal Toys Ltd., does not amount to manufacture as admitted by the department. Since the inputs have been used partly in the processing the material received from the principal manufacturer for doing the job work, the said material having been cleared without payment of any duty, the provisions of Rule 57CC are clearly applicable. It is not necessary that the return of the components to M/s. Mattel Toys Ltd., is on realisation of full potential price of the components or only a realisation of job charges. The term used is price charged. The respondents disagree with this proposition and are saying that, the said components are not marketable and the transactions does not involve sale. As already stated, the first part of the provision talks about the price charged. Therefore, this part of the argument is not relevant. The respondents are also saying that demand in question is time barred.
5. Since the limitation aspect has not been examined by the lower authorities, the matter has to be remanded for examining the plea relating to the applicability of limitation.
6. The Revenue's appeal is accordingly allowed by remanding the matter to the adjudicating authority for considering the aspects of limitation only. The order of the lower authorities are consequently set aside in above terms. The adjudicating authority shall pass fresh orders within three months from the date of this order after affording suitable opportunity to the respondents.