2007 (2) TMI 438 - AT - Central Excise

Summary

Issues:
Demand of duty on coated pipes, classification of pipes under CETA Schedule, applicability of Chapter Note 5, sustainability of duty demand, waiver of predeposit and stay of recovery.

Analysis:

1. Demand of Duty on Coated Pipes:
The appellants were involved in coating materials on pipes for supply to a specific corporation. The demand of duty amounting to over Rs. 25.00 crores was confirmed against them for the period August 2004 to March 2005. The jurisdictional departmental authorities accepted the classification of these pipes under Heading 73.06 of the CETA Schedule. The appellants argued that their activity did not constitute 'manufacture' before 18-4-2006, as per the Chapter Note which provided a fiction of 'manufacture' for coating pipes with specific materials. They relied on previous Tribunal orders supporting their claim.

2. Classification of Pipes under CETA Schedule and Applicability of Chapter Note 5:
The classification of pipes under Heading 73.06 was not disputed, and the show cause notice did not raise any classification issue. The Tribunal's past order supported the appellants' position, indicating a strong prima facie case against the demand raised in the impugned order. The payment of Service tax of over Rs. 2.00 crores for the same activity and period was also highlighted, suggesting a potential set-off if the duty demand is upheld.

3. Sustainability of Duty Demand and Waiver of Predeposit:
The sustainability of the duty demand on coated pipes was contested by the appellants based on the interpretation of 'manufacture' before 18-4-2006. The Tribunal acknowledged the prima facie strength of the appellants' case and granted waiver of predeposit and stay of recovery for the balance duty and penalty amounting to a little over Rs. 7.00 crores.

4. Conclusion and Disposition of the Appeal:
Given the significant financial implications involved, the Tribunal directed the speedy disposal of the appeal, scheduling it for 10th April 2007. The decision to grant waiver of predeposit and stay of recovery was based on the prima facie case presented by the appellants and the potential impact on Service tax payments if the duty demand is upheld.

This judgment addresses the complex issues surrounding the demand of duty on coated pipes, classification under the CETA Schedule, applicability of Chapter Note 5, and the sustainability of the duty demand, providing detailed legal analysis and considerations for the waiver of predeposit and stay of recovery.