2013 (2) TMI 413 - AT - Central Excise

Tribunal grants relief in duty waiver case, citing precedent on denied credit for inputs

The Tribunal granted relief to the applicant in a case involving the waiver of pre-deposit of duty amounting to Rs.2,78,77,385. The demand was contested ... Waiver of pre-deposit - stay of recovery during pendency of appeal - CENVAT credit - denial for lack of manufacturing facility - merchant exporter with supporting manufacturer - import under Notification 53/2003-Cus. with specified supporting manufacturer - acceptance of duty on final product precludes subsequent denial of creditWaiver of pre-deposit - CENVAT credit - denial for lack of manufacturing facility - merchant exporter with supporting manufacturer - acceptance of duty on final product precludes subsequent denial of credit - stay of recovery during pendency of appeal - Application for waiver of pre-deposit and grant of stay of recovery of confirmed duty demand arising from denial of CENVAT credit. - HELD THAT: - The Tribunal found that the appellant, a merchant exporter, had imported raw material under the scheme permitting import by a merchant exporter with a specified supporting manufacturer and had disclosed the supporting manufacturer's name. The appellant paid duty on the final goods (utilising credit and PLA) and the duty paid exceeded the quantum of credit now sought to be denied. Relying on the principle, as applied by the Bombay High Court in CCE, Pune-III v. Ajinkya Enterprises, that once duty on the final product has been accepted by the Revenue the corresponding credit cannot be denied, the Tribunal concluded that the demand based on denial of credit could not justify withholding waiver of pre-deposit. For these reasons the Tribunal exercised its power to waive the requirement of pre-deposit and to stay recovery of the confirmed dues during the pendency of the appeal. [Paras 5]Pre-deposit requirement waived and recovery of the demand stayed during pendency of the appeal.Final Conclusion: The stay petition is allowed: pre-deposit of the confirmed duty is waived and recovery is stayed while the appeal is pending, since the duty on the final product was paid by the appellant and exceeds the credit sought to be denied, and therefore the credit could not be denied in the circumstances. Issues:- Waiver of pre-deposit of duty- Denial of credit for inputs- Applicant's status as a merchant exporter- Import of raw material under CENVAT Credit Rules- Contention of the Revenue regarding facility to manufacture goodsAnalysis:The judgment pertains to an application for the waiver of pre-deposit of duty amounting to Rs.2,78,77,385. The demand was confirmed due to the denial of credit for inputs on the basis that the applicant lacked the facility to manufacture excisable goods, leading to the alleged wrongful availment of credit. The applicant claimed to be a merchant exporter who supplied imported raw materials to another company under specific rules. The goods were manufactured by the other company, and duty was paid by the applicant using both credit and funds from PLA. The applicant argued that the demand was unsustainable as they had followed the necessary procedures under Notification 53/2003-Cus. The Revenue contended that the applicant did not have the manufacturing facility, making the credit for raw materials unavailable and justifying the demand.The Tribunal noted that the applicant had paid duty exceeding the credit being denied. Citing a precedent from the Hon'ble Bombay High Court, the Tribunal emphasized that once the duty on the final product is accepted by the Revenue, the credit cannot be denied. Given that the applicant had paid more duty than the credit in question, the Tribunal decided to waive the pre-deposit of dues and stayed the recovery during the appeal process. Consequently, the stay petition was allowed, providing relief to the applicant.