2007 (4) TMI 460 - AT - Central Excise

Summary

Issues involved: Application for waiver of pre-deposit of duty amount, penalty, and interest under Section 11AC and 11AB of Central Excise Act u/s Rule 16(1) and Rule 16(2) of Cenvat Credit Rules, 2002.

Summary:
1. Issue of Applicability of Rule 16(1) and Rule 16(2) of Cenvat Credit Rules, 2002:
The dispute arose regarding the duty amount, penalty, and interest imposed on the appellant under Section 11AC of Central Excise Act and Rule 16(1) and Rule 16(2) of Cenvat Credit Rules, 2002. The appellant, engaged in the manufacture of aerated waters, transferred used glass bottles and plastic crates to its sister unit. The contention was whether Rule 16(1) and Rule 16(2) applied to the transfer of these items.

2. Contentions of the Parties:
The appellant argued that Rule 16(1) applies only when duty-paid goods are brought back into the factory for specific purposes, which was not the case with the transfer of used bottles and crates to the sister unit. They claimed that since no credit was taken on the used bottles initially, the requirement to reverse the credit under Rule 16(2) did not arise. The appellant also highlighted that the transfer was revenue-neutral as the receiving unit would be entitled to equivalent Cenvat credit.

3. Decision and Rationale:
The Tribunal considered the submissions and found that the used bottles and crates were not inputs removed as such, as confirmed by the Commissioner. Therefore, the provisions of Rule 16(1) were not attracted since the items were received back for refilling, not for specific manufacturing purposes. As the appellant did not claim credit on the used bottles initially, the obligation to reverse the credit during transfer did not apply. Consequently, the Tribunal held that the appellant had made a prima facie case in their favor and waived the pre-deposit of duty and penalty imposed, staying the recovery until the appeal's disposal.