2003 (4) TMI 446 - AT - Central Excise

Summary

Issues:
Six applications for stay of recovery of Central Excise duty and penalty.

Analysis:
The case involved six applications for stay of recovery of Central Excise duty and penalty. The dispute arose when M/s. Maruti Udyog Ltd. imported components for their vehicles Wagon R and Baleno, which were assessed to Customs duty and additional Customs duty under Heading 87.03 of the Customs Tariff Act. Maruti Udyog Ltd. took Modvat credit of the additional Customs duty paid on the components. Subsequently, the imported components were sent to various vendors for further manufacturing and assembly. The Commissioner disallowed the Modvat credit, arguing that the components should have been classified under different headings, resulting in a lower excise duty rate of 16% instead of 40%. The Advocate for the Applicants argued that the duty paid by Maruti Udyog Ltd. at 40% should not be questioned at the vendors' end. Reference was made to relevant case law, including a decision by a Larger Bench of the Tribunal, to support the argument.

In response, the Senior Departmental Representative emphasized the provisions of Rule 57AB(1)(b) of the Central Excise Rules, stating that appropriate duty must be paid when inputs are removed from the factory. The Department contended that the decision of the Larger Bench regarding Rule 57F would not be applicable in this case.

After considering both sides' submissions, the Tribunal found that the components imported by Maruti Udyog Ltd. had incurred a countervailing duty of 40% under Heading 87.03. It was acknowledged that Maruti Udyog Ltd. had paid duty at the same rate when clearing the inputs to their vendors. Citing relevant Tribunal decisions, the Tribunal held that a strong prima facie case existed for staying the recovery of the duty and penalty from all the Applicants. Consequently, the Tribunal ordered the stay of recovery, scheduling all matters for regular hearing on a specified date.