2007 (1) TMI 418 - AT - Central Excise

Summary

Issues:

1. Whether the applicant is liable to pay 10% on the value of pipes cleared captively for use in the manufacture of sprinkler systems or with reference to the value of the sprinkler system which is the final product cleared by the applicant without payment of duty.

Analysis:

The case involved a situation where the applicant contended that they should pay 10% on the value of pipes used captively for manufacturing sprinkler systems, whereas the demand made in the impugned order was based on the value of the sprinkler system itself. The applicant argued that they had already paid 10% based on the value of pipes. On the other hand, the respondent, represented by the learned D.R., asserted that the applicant had taken credit for HDPE granules used in manufacturing HDPE pipes, parts of which were used in the exempted final product, the sprinkler system. The respondent argued that as per Rule 6(3)(b) of the Cenvat Credit Rules, 2004, the applicant was liable to pay 10% of the value of the sprinkler system.

Upon hearing the arguments and examining the record, the judge found that Rule 6(3)(b) indeed mandated the manufacturer to pay 10% of the value of exempted final products at the time of clearance from the factory. Since the applicant had cleared the exempted final product, the sprinkler system, for sale, they were deemed liable to pay 10% of the value of the sprinkler system. Consequently, the judge ruled that the applicant had not established a prima facie case for the waiver of the total amount of pre-deposit of duty. Taking into account the facts, circumstances of the case, and the financial hardship faced by the applicant, the judge directed them to pre-deposit Rs. 2,00,000 within 8 weeks and report compliance by a specified date. Upon the deposit of this amount, the balance of the duty would be waived until the appeal's disposal.

This judgment highlights the importance of adherence to the provisions of the Cenvat Credit Rules, 2004, and the obligation of manufacturers to pay the specified percentage on the value of exempted final products. It also underscores the judicial discretion to consider financial hardship while ordering pre-deposit of duty amounts.