2009 (2) TMI 690 - AT - Central Excise

CENVAT/MODVAT credit - job-work - Notification No. 214/86 - dutiable and exempted goods using common inputs - demand of duty with penalty

Summary

Issues:
1. Whether duty and penalty pre-deposit condition was waived for deciding appeals.
2. Whether duty payment is required for job work under Notification No. 214/86.
3. Whether goods cleared under job work are exempted or cleared at nil rate of duty.
4. Applicability of Rule 6 of Cenvat Credit Rules, 2004 to job work clearances.
5. Whether the impugned order should be set aside and the matter remanded for fresh decision.

Analysis:
1. The Tribunal waived the pre-deposit condition of duty and penalty to proceed with deciding the appeals, citing coverage by a Larger Bench decision and the Revenue's appeal against the impugned order.
2. The appellant, engaged in job work for a principal manufacturer under Notification No. 214/86, faced a demand by the Revenue for payment of 10% value of exempted goods due to taking credit for furnace oil. The dispute centered on whether duty payment was required in this scenario.
3. The order of the Commissioner was challenged by both the assessee and the Revenue. The contention was that goods cleared under job work were not exempted or cleared at nil duty rate, with reference to various precedent judgments supporting the position that duty liability shifts to the recipient principal manufacturer.
4. It was argued that Rule 6 of Cenvat Credit Rules, 2004 applied to situations where a unit manufactures both dutiable and exempted goods using common inputs, not to clearances under job work.
5. The Tribunal found in favor of the assessee and set aside the impugned order, remanding the matter to the Commissioner for a fresh decision based on precedent judgments and the department's own appeal stance. Both the stay petition and appeals were disposed of accordingly.