2009 (6) TMI 757 - AT - Central Excise

Summary

Issues:
1. Denial of benefit of Notification No. 14/2002 for concessional rate of duty on processed fabrics.
2. Interpretation of the explanation in the Notification regarding duty payment on fabrics.
3. Consideration of Cenvat credit in relation to charging duty on processed fabrics.
4. Financial position of the appellants affecting the case.

Analysis:

1. The appellants, operating a composite textile mill, were denied the benefit of Notification No. 14/2002 for concessional duty rates on processed fabrics, leading to a demand for duty payment, interest, and penalty under Section 11AC of the Central Excise Act, 1944. The dispute arose from the department's contention that unprocessed fabrics purchased by the appellants were not subject to excisable duty, thus ineligible for the concessional rate.

2. The advocate for the appellants argued that the department's stance was contradictory as the appellants were allowed Cenvat credit on unprocessed fabrics based on an explanation deeming them duty paid. Reference was made to Notification No. 37/2002 and a Board clarification supporting the view that fabrics from a composite textile mill should be considered duty paid. The department, however, emphasized a Tribunal decision requiring duty deposit in a similar case.

3. Upon evaluating the submissions, the Tribunal noted the overlooked explanation in the Notification deeming all market-bought fabrics as duty paid. The advocate's argument regarding the inconsistency in allowing Cenvat credit but denying concessional duty was deemed strong. The Tribunal acknowledged the appellants' weak financial position and the impact on duty calculation if concessional rates were denied, potentially reducing the duty demand significantly.

4. Considering the prima facie case presented by the appellants, the Tribunal waived the pre-deposit under Section 35F of the Central Excise Act, 1944, allowing the stay petition unconditionally during the appeal's pendency. The decision was made to support the appellants' position based on the interpretation of the Notification and the financial implications involved in the case.