2008 (8) TMI 729 - AT - Central Excise

Summary

Issues:
1. Whether the appellants are required to pre-deposit duty and penalty.
2. Whether the denial of Cenvat credit to the appellants was justified.
3. Whether the processes carried out by the assessee amount to a process of manufacture.
4. Whether the demands made by the Revenue are time-barred.
5. Whether the appellants have made out a strong case in their favor.

Analysis:

1. The appellants were required to pre-deposit duty, penalty, and denied Cenvat credit. The Commissioner proceeded to recover the amount based on the alleged irregular availing of credit during a specific period. The appellant sought waiver of pre-deposit, claiming a strong case on merits.

2. The Revenue considered the appellants as manufacturers of various parts falling under specific sub-headings. The goods received were subjected to processes like blackening, buffing, inspection, and packing before export under a letter of Undertaking without duty payment. The Revenue viewed these activities as not amounting to manufacture, leading to the denial of credit. The appellant argued that these processes were essential, changing the goods' character, and falling under Note 6 of Section XVI, indicating a process of manufacture.

3. The central question was whether the processes conducted by the assessee constituted a process of manufacture. Note 6 of Section XVI was crucial in determining that any process bringing essential characteristics of a final product into existence qualifies as manufacture. The Tribunal found that the processes altered the inputs' character, creating the final product's essential features, supporting the appellant's contention.

4. The issue of time-bar was raised concerning the demands made by the Revenue. The Show Cause Notice was issued belatedly, and the facts were known to the Department, potentially rendering the demands time-barred. The Tribunal considered this in the appellant's favor, along with the strong case presented.

5. Considering the arguments and evidence presented, the Tribunal found in favor of the appellants. They allowed the stay application, granting a waiver of pre-deposit and staying the recovery until the appeal's disposal. The Tribunal scheduled an expedited hearing due to the significant amounts involved, ensuring no recovery even after 180 days of the stay order.