Job-work exemption and limitation in excise stay proceedings: prior departmental knowledge limited extended period exposure

In a CESTAT stay matter involving job-work clearances, the tribunal examined prima facie entitlement to waiver of pre-deposit and stay of recovery. It noted that the department had been informed in writing of the job-work arrangement and the intended exempted use of the processed goods, so the extended period of limitation was, prima facie, not invokable on the basis of prior departmental knowledge. At the same time, the job-work exemption was considered prima facie inapplicable where the principal manufacturer was clearing only exempted final products and not both dutiable and exempted products together. The question of CENVAT credit availability on inputs was left open for final hearing, and partial pre-deposit was directed.

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Issues: Whether the appellant had made out a prima facie case for waiver of pre-deposit and stay of recovery, and whether the demand was, at least prima facie, confined to the normal period of limitation.

Analysis: The goods were manufactured on job work for a principal manufacturer who had intimated the department in writing that raw material would be sent without availing credit and the processed goods would be returned for use in exempted final products. On this factual matrix, the extended period was not, prima facie, invokable because the department had prior knowledge of the job-work arrangement and the intended use of the goods. However, on the exemption issue, the job-work notification was held, prima facie, inapplicable where the principal manufacturer was clearing only exempted final products and not dutiable and exempted products together. The question of availability of CENVAT credit on the inputs, and its effect on the net duty liability, was left for final hearing.

Conclusion: The appellant was not granted total waiver. It was directed to pre-deposit Rs. 5 lakhs, and on such deposit the balance duty, interest and penalty was stayed pending final disposal.

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