2006 (2) TMI 314 - AT - Central Excise

Summary

Issues:
1. Whether the expenses related to gratuity and benefits paid to employees of an acquired unit should be included in the manufacturing cost of the final product.
2. Whether the reopening of proceedings by issuing a Show Cause Notice is time-barred.
3. Whether the appellants are entitled to a waiver of pre-deposit and stay of recovery based on financial hardship and being a sick unit.

Analysis:
1. The case involved a dispute regarding the inclusion of gratuity and other benefits paid to employees of an acquired unit in the manufacturing cost of the final product. The appellants argued that these expenses were not related to the manufacturing cost. They cited various judgments to support their contention. The Tribunal observed that prima facie, the payment towards gratuity cannot be linked to the manufacturing cost. The appellants were also declared a sick unit by the BIFR, further supporting their case. Consequently, the Tribunal accepted the appellants' plea for a waiver of pre-deposit and stay of recovery.

2. The issue of time-barred reopening of proceedings was raised by the appellants, contending that a Show Cause Notice had been previously issued and dropped on the same matter. They relied on the principle that the subsequent reopening of the matter by a Show Cause Notice is hit by the time bar. The Tribunal found merit in this argument, noting that the issue was prima facie covered by a relevant ruling. Therefore, the Tribunal accepted the appellants' argument on the limitation issue.

3. The appellants sought a waiver of pre-deposit and a stay of recovery based on financial hardship and being a sick unit as per the BIFR order. The Revenue, represented by the SDR, argued for pre-deposit based on a Supreme Court judgment and the Commissioner's findings. However, the Tribunal, after careful consideration, sided with the appellants, noting their strong case on merits, limitation, and financial hardship. Consequently, the Tribunal allowed the stay applications and granted the appellants' prayer for waiver of pre-deposit. Additionally, the Tribunal approved the prayer for early hearing, scheduling the matter for a hearing on a specified date.