2006 (9) TMI 362 - AT - Central Excise

Summary

Issues:
Application for waiver of pre-deposit of duty, denial of excise deemed credit, penalty imposition.

Waiver of Pre-deposit of Duty:
The case involved an application for the waiver of pre-deposit of duty amounting to Rs. 14,11,934/- and denial of excise deemed credit availed along with a penalty of Rs. 5 Lakhs. The applicant had taken deemed credit as per Notification 6/2002-N.T. and utilized it for payment of basic excise duty on finished goods. However, a show cause notice was issued stating that the credit should have been divided in a specific ratio for basic excise duty and additional excise duty. The appellant argued that the provision of the notification entitled them to take credit at the prescribed rate without the need for splitting it. They contended that the entire exercise was revenue neutral as they had paid the additional excise duty through PLA. The Tribunal found in favor of the appellant, stating that there was no requirement to split the credit and that the aggregate credit taken was within the prescribed limits. Consequently, the Tribunal waived the pre-deposit of the duty and stayed the recovery of the duty and penalty until the appeal's disposal.

Denial of Excise Deemed Credit:
The appellant had availed excise deemed credit as per Notification 6/2002-N.T. and utilized it for paying basic excise duty on finished goods. However, a show cause notice was issued, alleging a short levy and excess availment of credit due to not splitting the credit into basic and additional excise duty components as per the prescribed ratio. The appellant argued that the notification allowed them to take credit at the prescribed rate without the need for such splitting. They also highlighted that the payment of additional excise duty was done through PLA, making the exercise revenue neutral. The Tribunal agreed with the appellant's interpretation of the notification, stating that there was no requirement to split the credit and that the aggregate credit taken was as per the prescribed rate. Consequently, the Tribunal ruled in favor of the appellant, waiving the pre-deposit of the duty and staying the recovery of the duty and penalty until the appeal's disposal.

Penalty Imposition:
In addition to the denial of excise deemed credit and waiver of pre-deposit of duty, a penalty of Rs. 5 Lakhs was imposed on the appellant. The Tribunal's decision to waive the pre-deposit of duty and stay the recovery of duty and penalty until the appeal's disposal effectively addressed the penalty imposition issue as well. The Tribunal found the appellant's argument regarding the revenue neutrality of the exercise compelling and ruled in their favor on all aspects, including the penalty imposition.

In conclusion, the judgment by the Appellate Tribunal CESTAT, Mumbai, in the case involving waiver of pre-deposit of duty, denial of excise deemed credit, and penalty imposition, favored the appellant based on their interpretation of Notification 6/2002-N.T. The Tribunal ruled that the appellant was entitled to take credit at the prescribed rate without the need to split it into basic and additional excise duty components, and that the exercise was revenue neutral. As a result, the Tribunal waived the pre-deposit of duty and stayed the recovery of the duty and penalty until the appeal's disposal.