2001 (5) TMI 498 - AT - Central Excise

Tribunal rules in favor of Govt. undertaking, waives duty deposit for manufacturing plants

The Tribunal ruled in favor of the applicant, a Government of India undertaking, in the case involving waiver of duty deposit for plants at Vaghodia and ... Stay/Dispensation of predeposit - Manufacture Issues:1. Application for waiver of deposit of duty for two plants.2. Interpretation of rules regarding deposit of duty.3. Determination of lean gas as a by-product or result of manufacture.4. Applicability of Modvat credit and Rule 57CC.5. Decision on waiver of deposit of duty and penalty.Analysis:1. The case involved two applications for the waiver of deposit of duty for the applicant's plants at Vaghodia and Usar. The duty amounts in question were significant, totaling approximately Rs 8.91 crores and Rs 6.46 crores, with an additional penalty of Rs 1.00 lakh.2. The central issue revolved around the interpretation of rules concerning the deposit of duty. The Commissioners contended that a deposit equal to 8% of the sale price of the exempted lean gas manufactured by the applicant was required under Rule 57CC.3. The debate focused on whether the lean gas produced by the applicant was a by-product or a result of manufacture. The applicant argued that the lean gas was not a result of manufacture but a by-product, thus exempting it from the deposit requirement under Rule 57CC.4. The applicant's counsel asserted that the Modvat credit taken on molecular sieves was not in the nature of duty or credit, thereby challenging the applicability of Rule 57CC. They further referenced a Supreme Court judgment to support their claim that the credit had not been utilized in the manufacture of LPG.5. The Tribunal, after considering the contentions from both sides, found that while the lean gas could be considered a by-product, it emerged as a result of the applicant's actions during the manufacturing process. However, the Tribunal acknowledged the applicant's intention to reverse the Modvat credit and the circular from the Board indicating that the deposit under Rule 57CC was not in the nature of duty or credit. Consequently, the Tribunal waived the deposit of duty and penalty, staying their recovery due to the applicant's status as a Government of India undertaking.6. Given the substantial duty amounts involved and the recurring nature of the issue, the Tribunal granted the prayer for an out-of-turn hearing and scheduled the appeals for further hearing on a specified date.