2005 (3) TMI 618 - AT - Central Excise

Summary

Issues:
1. Denial of benefit of Notification No. 5/99-C.E. due to alleged violation of conditions.
2. Request for waiver of pre-deposit and stay of recovery in relation to duty and penalty amounting to approximately Rs. 3.77 crores each.
3. Prima facie view on nullification of violation through payment equivalent to the capital goods credit.
4. Granting of waiver and stay of recovery in light of prima facie case made by the appellants.

Analysis:

1. The judgment revolves around the denial of the benefit of Notification No. 5/99-C.E. to the assessee due to an alleged violation of conditions. The notification granted exemption from Basic Excise Duty and Special Excise Duty subject to certain conditions, including the requirement that no credit under Rule 57Q of the Central Excise Rules should have been availed in the manufacturing process. The Commissioner denied the benefit based on the appellants' use of Modvat credit on capital goods prior to the relevant period, leading to the demand for duty and penalty.

2. The appellants sought waiver of pre-deposit and stay of recovery concerning the substantial amounts of duty and penalty imposed. The application argued that the alleged violation of conditions was rectified by payment from PLA, thereby nullifying any breach. The Senior Advocate for the appellants contended that the Commissioner's reasoning for denial was unfounded, as the condition was not breached due to the prior availment of capital goods credit.

3. The Tribunal, after considering the submissions, took a prima facie view that the payment made by the assessee equivalent to the capital goods credit in question nullified the alleged violation of the notification condition. Consequently, the Tribunal held that the appellants had established a strong prima facie case against the demand solely based on the alleged violation. As a result, the Tribunal granted the waiver of pre-deposit and stay of recovery for both the duty and penalty amounts, acknowledging the appellants' argument and the potential rectification of the violation.

4. Additionally, the Tribunal acceded to the Senior Departmental Representative's request for early disposal of the appeal due to the high stake involved for the Revenue. The appeal was scheduled for final hearing on a specific date to ensure a timely resolution of the matter. The judgment emphasized the importance of addressing the issues promptly, given the significant implications for both parties involved in the dispute.