2005 (9) TMI 560 - AT - Central Excise

Summary

Issues:
1. Waiver of duty demanded upon the appellants.
2. Availing Cenvat credit on duty for inputs and finished goods.
3. Interpretation of transitory provisions under Rule 3(2).

Analysis:
1. The appellants sought the waiver of duty demanded upon them due to changes in duty rates. They were availing the benefit of Notification No. 10/2002-C.E. and paying duty @ 4% ad valorem on finished goods. However, when the duty rate was increased to 8%, they wanted to avail Cenvat credit on inputs and finished goods. The Department disallowed the credit. The appellants argued that since their inputs were duty paid and the final products were also duty paid, they should be allowed the credit. The Revenue contended that transitory provisions did not permit this as the goods were originally liable to pay duty @ 4%.

2. The Tribunal considered both sides' submissions and found that interpreting transitory provisions to disallow Cenvat credit would go against the broader scheme of Cenvat and defeat its purpose. The Tribunal acknowledged that the appellants had already deposited a significant amount towards duty and penalty. Therefore, the Tribunal concluded that the appellants had made a case for the waiver of the balance amount of duty and penalty. As a result, the recovery of the remaining duty and penalty was stayed until the appeals were disposed of.

3. The key point of contention was the interpretation of transitory provisions under Rule 3(2) regarding the availability of Cenvat credit on duty paid inputs and finished goods when duty rates changed. The Tribunal emphasized that a strict interpretation that disallowed such credit would undermine the overall Cenvat scheme. By granting the waiver of duty and penalty, the Tribunal aimed to uphold the principles of fairness and prevent undue financial burden on the appellants during the transition period of duty rate changes.