2005 (11) TMI 300 - AT - Central Excise

Summary

Issues:
1. Waiver of pre-deposit of duty demand under Section 11D of the Central Excise Act.
2. Interpretation of Section 11D in relation to duty collected under Compounded Levy Scheme.
3. Applicability of Section 35F regarding stay applications for demands under Section 11D.
4. Determination of whether service charges collected represent duty or not.

Analysis:
The judgment dealt with an application for waiver of pre-deposit of duty demand arising from the Commissioner of Central Excise Thane-II's order. The applicant had availed of the Compounded Levy Scheme under the Central Excise Rules, 1944, and was demanded Rs. 1,85,09,688 under Section 11D of the Central Excise Act for allegedly collecting but not depositing duty from customers. The dispute centered around whether the additional service charges collected by the applicant, in addition to processing charges, represented Central Excise duty not deposited with the Government.

The Advocate for the applicant argued that Section 11D applies only when duty is collected from a 'buyer,' contending that the recipients were merchant manufacturers, not buyers. Additionally, it was argued that no stay application under Section 35F was necessary for disputes related to sums collected under Section 11D as they did not constitute duty. The applicant maintained that the collected sums were service charges, not duty, supported by statements from recipients indicating the charges were for handling and delivery.

On the other hand, the Senior Departmental Representative (SDR) argued that the service charges collected represented duty, especially since they were not collected before the applicant joined the Compounded Levy Scheme. The SDR highlighted the Commissioner's findings and contended that the charges were akin to duty. The Tribunal noted the differing contentions and the need for a detailed examination to determine if the service charges indeed represented duty.

After considering the submissions, the Tribunal found that further examination was necessary to ascertain whether the service charges constituted duty. Notably, the Commissioner's findings indicated that the applicant began collecting service charges only after joining the Compounded Levy Scheme, and recipients acknowledged that the charges partly represented duty. The Tribunal rejected the applicant's argument that Section 35F did not apply to demands under Section 11D and ordered a pre-deposit of Rs. 20 lakhs towards duty within eight weeks, failing which the appeal could be dismissed. This decision aimed to ensure a fair assessment of whether the collected charges were indeed duty, emphasizing the need for a detailed examination before reaching a conclusive decision.