2005 (4) TMI 476 - AT - Central Excise

Summary

Issues:
Stay of recovery of demand and penalty under Rule 6(3)(b) of the Cenvat Credit Rules, 2002 based on manufacturing metalized polyester film on job work basis.

Analysis:
The application sought to stay the recovery of demand and penalty imposed by the Commissioner under Rule 6(3)(b) of the Cenvat Credit Rules, 2002. The appellants, engaged in manufacturing metalized polyester film on job work basis, argued that duty was demanded from them due to manufacturing both dutiable and exempt products using common inputs without maintaining separate accounts. They contended that the duty was not applicable as the metalized film manufactured on job work basis was exempt under Notification No. 214/86-C.E. and was returned to the principal manufacturer for further use in dutiable products. Citing precedents, they argued that Rule 6(3)(b) did not apply when goods were not sold, as in their case. On the other hand, the Respondent argued that duty should be charged as the appellants manufactured both dutiable and exempted goods using common inputs without separate accounts.

The Tribunal considered the submissions and found that the appellants manufactured the metalized film on job work basis under an exemption notification and returned it to the principal manufacturer for use in dutiable products. Since the film was not sold but used in the manufacture of dutiable pouches, the Tribunal held that prima facie there was no clearance of goods on sale under Rule 6(3)(b) of the Cenvat Credit Rules. Therefore, the Tribunal found sufficient grounds to stay the recovery of duty and penalty, waiving the pre-deposit condition for the appeal hearing. The appeal was scheduled for a future hearing, and the application was disposed of accordingly.