Appellants entitled to Cenvat credit despite pending litigation. Tribunal waives pre-deposit for appeal.

The Tribunal held that the appellants were entitled to the Cenvat credit of duty paid by M/s. Satya Metals, despite the pending litigation between M/s. Satya Metals and Revenue. The Tribunal also found that M/s. Satya Metals was not eligible for the benefit of Notification No. 56/2002. Regarding the requirement of pre-deposit for hearing the appeal, the Tribunal waived the pre-deposit, allowing the stay petitions unconditionally.

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Issues Involved:
1. Entitlement to Cenvat credit availed by the appellants.
2. Eligibility of M/s. Satya Metals to the benefit of Notification No. 56/2002.
3. Impact of pending litigation between M/s. Satya Metals and Revenue on the appellants.
4. Requirement of pre-deposit for hearing the appeal.

Detailed Analysis:

1. Entitlement to Cenvat Credit:
The primary issue revolves around whether the appellants are entitled to the Cenvat credit of duty paid by M/s. Satya Metals. The appellants received inputs from M/s. Satya Metals, a 100% EOU located in J&K, availing benefits under Notification No. 56/2002. The Revenue contended that M/s. Satya Metals was not entitled to this benefit, thus making the duty paid by them improper. The Tribunal noted that the credit availed by the appellants was of duty paid by M/s. Satya Metals, and there was no dispute about the fact that the inputs were cleared on payment of duty. The Tribunal held that any dispute at the supplier's end would not affect the input receiver's entitlement to the credit, referencing precedent decisions which support that the assessment done at the input supplier end cannot be changed at the input receiver end.

2. Eligibility of M/s. Satya Metals to the Benefit of Notification No. 56/2002:
The Tribunal examined whether M/s. Satya Metals, being a 100% EOU, was eligible for the area-based exemption under Notification No. 56/2002. According to the Revenue, the notification did not specifically mention its applicability to 100% EOUs, and under Section 5A(1) of the Central Excise Act, exemptions do not apply to goods produced by 100% EOUs unless specifically provided. The Tribunal found that the notification did not mention applicability to 100% EOUs, thus prima facie indicating that M/s. Satya Metals was not eligible for the exemption.

3. Impact of Pending Litigation Between M/s. Satya Metals and Revenue on the Appellants:
The Tribunal noted that the issue between M/s. Satya Metals and the Revenue was pending before the Hon'ble High Court of J&K. The Tribunal opined that even if the dispute was settled against M/s. Satya Metals, making them liable to pay duty in cash, it would not affect the appellants' entitlement to the credit of duty paid by M/s. Satya Metals. The Tribunal emphasized that the duty paid character of the final product would not change, and the appellants' entitlement to credit should not be affected by the dispute at the supplier's end.

4. Requirement of Pre-deposit for Hearing the Appeal:
There was a difference of opinion between the members regarding the requirement of pre-deposit. One member opined that the appellants had a prima facie case and should be exempted from pre-deposit, while the other member suggested that the appellants should deposit 50% of the duty for the appeal to be heard. The matter was referred to a third member, who concluded that the appellants should not face hardship of pre-deposit for hearing the appeal, thus allowing the stay petitions unconditionally.

Separate Judgments:
The judgment includes separate opinions by the members due to a difference in views. The majority opinion ultimately waived the requirement for pre-deposit, allowing the stay petitions unconditionally.

Conclusion:
The Tribunal found merit in the appellants' plea, recognizing their entitlement to Cenvat credit and noting that the pending litigation at the supplier's end should not affect their entitlement. The stay petitions were allowed unconditionally, providing relief to the appellants from the pre-deposit requirement.

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