2004 (11) TMI 388 - AT - Central Excise

Summary

Issues:
1. Waiver of pre-deposit of duty and penalty under Section 35F and stay recovery.
2. Interpretation of Notification No. 6/2002-C.E. (N.T.) regarding deemed credit for Multi Locational Composite Mills.

Analysis:
1. The case involved an application for the waiver of pre-deposit of duty and penalty under Section 35F arising from the order of the Commissioner of Central Excise, Mumbai-IV. The Commissioner demanded a specific amount as inadmissible deemed credit availed by the appellant under Rule 12 of Cenvat Credit Rules, 2002, along with imposing a penalty under Rule 13 of the same rules.

2. The applicant, a Multi Locational Composite Mill engaged in manufacturing goods under specific Chapter Headings, availed of the Cenvat facility for processing grey cotton man-made fabrics received from another unit. The issue revolved around the interpretation of Notification No. 6/2002-C.E. (N.T.) and whether a Multi Locational Composite Mill could avail deemed credit for unprocessed fabric woven in the same composite Mill and subjected to processing therein.

3. The Commissioner held that such Mills were not eligible for deemed credit in this scenario. However, the Tribunal analyzed the provisions of the notification and the explanatory notes to the budgetary changes of 2002-03. It was observed that the intention of the Government was not to deny deemed credit for grey fabrics manufactured by one composite Mill of a Multi Locational Public Limited Company and received in another composite Mill under the same management.

4. The Tribunal noted that the explanatory note clarified that deemed credit could be availed only for fabrics received from outside for processing in the case of composite Mills. The interpretation given by the Commissioner was considered to potentially contradict the intent behind the notification and the budgetary changes. Consequently, the Tribunal found that the matter was not free from doubt and that the appellants had made out a prima facie case in their favor.

5. Ultimately, the Tribunal decided to waive the pre-deposit of duty and penalty during the appeal, considering the ambiguity in the interpretation of the notification and the potential validity of the appellant's case based on the available evidence and legal provisions.