2009 (1) TMI 688 - AT - Central Excise

Summary

Issues: Waiver of pre-deposit and stay of recovery of interest amounts demanded by the original authority.

In the judgment delivered by the Appellate Tribunal CESTAT, CHENNAI, the appeal filed by M/s. Pricol Ltd. sought waiver of pre-deposit and stay of recovery of interest amounts totaling Rs. 72,309/- and Rs. 1,28,342/- demanded by the original authority and upheld in the impugned orders. The issue revolved around the reversal of credit-availed capital goods, jigs, and fixtures by the appellants to their vendors who manufactured and supplied components. The demand for interest was based on the delay in reversing the credit. The appellants argued that they always maintained sufficient balance in their CENVAT accounts, and the non-reversal of credit did not lead to the clearance of final products without payment of duty. They contended that they were not obligated to reverse credit related to capital goods when transferring them to suppliers of components, citing Rule 4(5)(b) of CENVAT Credit Rules, 2004. The Tribunal considered the submissions and referred to the decision in Monica Electronics case, holding that the provisions applied to the removal of capital goods to suppliers of components as well. The Tribunal found a prima facie case against the demand for interest and granted waiver of pre-deposit and stay of recovery of the interest amount pending the appeal.

This judgment addressed the issue of waiver of pre-deposit and stay of recovery of interest amounts demanded by the original authority. The key contention was whether the appellants were required to reverse credit-availed capital goods when transferring them to suppliers of components. The appellants argued that they had maintained sufficient balance in their CENVAT accounts and that the non-reversal of credit did not lead to the clearance of final products without duty payment. They relied on Rule 4(5)(b) of CENVAT Credit Rules, 2004, which allows for the transfer of credit-availed capital goods to job workers without the need for reversal. The Tribunal referred to the Monica Electronics case, which interpreted similar provisions under Rule 57-S of the Central Excise Rules, and held that such provisions also covered the removal of capital goods to suppliers of components. The Tribunal found merit in the appellants' arguments and granted waiver of pre-deposit and stay of recovery of the interest amount pending the appeal.

The judgment also discussed the interpretation of Rule 4(5)(b) of CENVAT Credit Rules, 2004, which allows for the removal of credit-availed capital goods to a job worker without the requirement of reversal. The Tribunal noted that there was no stipulation in the rule mandating the reversal of credit in such cases. By referencing the decision in the Monica Electronics case, the Tribunal concluded that the provisions extended to the removal of capital goods to suppliers of components who manufactured intermediate goods independently. The Tribunal found that the appellants had made a prima facie case against the demand for interest, leading to the grant of waiver of pre-deposit and stay of recovery of the interest amount pending the appeal.