2006 (3) TMI 427 - AT - Central Excise

Summary

Issues: Denial of CENVAT credit for machined castings, Penalty imposition, Waiver of pre-deposit and stay of recovery

The Appellate Tribunal CESTAT, CHENNAI, in the case, dealt with the denial of CENVAT credit of Rs. 47,89,219/- to the appellants for machined castings during September 2000 to March 2003, along with the imposition of a penalty of Rs. 1.00 lakh. The primary issue revolved around whether the appellants were entitled to avail the credit for the machined castings. The Tribunal considered the clearance of unmachined castings for job work, subsequent machining by the job worker, and the export of goods after testing by the appellants.

Upon thorough consideration and examination of the submissions from both sides, the Tribunal found that the question of entitlement to CENVAT credit needed to be answered in the affirmative. The Tribunal referred to the Board's clarification in Chapter 5 of Part 7 of CBEC's Excise Manual, effective from 1-9-2001, which stated that there was no prohibition for a manufacturer to remove inputs or capital goods for export under bond. Additionally, Circular No. 283/117/96-C.X. dated 31-12-1996 by the Board emphasized that clearance of inputs for export under bond could be treated akin to the final product, subject to the provisions of the relevant rule. The Tribunal noted that the appellants were claiming under a provision similar to the one mentioned in the 1996 Circular, thus establishing a prima facie case against the duty demand and penalty. Consequently, the Tribunal granted a waiver of pre-deposit and stay of recovery concerning the duty and penalty amounts.

In conclusion, the Tribunal's decision favored the appellants by acknowledging their entitlement to CENVAT credit for the machined castings based on the provisions of the Cenvat Credit Rules, 2002, and the Board's clarifications. The waiver of pre-deposit and stay of recovery was granted in light of the prima facie case made out by the appellants against the duty demand and penalty, ensuring a fair outcome in the matter.