2005 (3) TMI 671 - AT - Central Excise

Duty demand & penalties under Rule 173Q quashed in favor of assessee: repacking not new manufacturing

The judgment addressed duty demand and penalties imposed under Rule 173Q on the Director and Authorised Signatory, amounting to approximately Rs. 5.73 ... Stay/Dispensation of pre-deposit - Cenvat/Modvat - Removal of inputs Issues Involved:1. Duty demand and penalty imposition under Rule 173Q on the Director and Authorised Signatory.2. Payment of duty on imported Aromatic chemicals after availing Modvat credit.3. Determination of duty liability when chemicals are repacked and labelled.4. Applicability of Chapter Note 11 to Chapter 29.5. Waiver of duty and penalty on merits and bar of limitation.Analysis:1. The judgment addressed the duty demand of approximately Rs. 5.73 Lakhs and penalties imposed under Rule 173Q on the Director and Authorised Signatory. The issue revolved around the duty payment after availing Modvat credit on imported Aromatic chemicals. The Revenue argued that repacking and labelling constituted manufacturing afresh, warranting duty based on the value as per Section 4 of the Central Excise Act on the day of removal. However, the assessee contended that the duty demand for the period in question was time-barred, supported by explicit declarations and reliance on a previous Bench decision regarding labelling and repacking not amounting to manufacturing.2. The second issue pertained to the reversal of credit of CVD availed when inputs are removed as inputs. The judgment referenced a Larger Bench decision in the case of ABB, which favored the assessee on this issue. Additionally, the applicability of Chapter Note 11 to Chapter 29 was considered, with a prima facie inclination in favor of the assessee. Consequently, the judgment found a strong case in favor of the assessee for a full waiver of duty and penalty, both on merits and due to the bar of limitation.3. The Tribunal proceeded to grant the application, allowing full waiver of the pre-deposit requirements under Section 35F of the Central Excise Act. It also ordered the stay of recovery pending final orders in the appeal. The decision was pronounced in court, emphasizing the favorable stance towards the assessee based on the issues discussed and analyzed during the proceedings.