2010 (5) TMI 724 - AT - Central Excise

Summary

Issues:
Waiver from pre-deposit of duty demand, interest, and penalty; Allegations of improper return of materials; Prima facie case of the appellant; Revenue neutrality of the case.

Waiver from Pre-deposit of Duty Demand, Interest, and Penalty:
The appellant sought waiver from the requirement of pre-deposit of duty demand, interest, and penalty amounting to Rs. 41,46,413/- along with interest and penalties imposed under various sections of the Central Excise Act. The appellant's counsel argued that there was no conclusive evidence to prove that the material returned to customers was from the stock of inputs purchased by the appellant for their own use, as alleged by the department. The counsel emphasized a strong prima facie case and the undue hardship the pre-deposit would cause. The Tribunal considered the submissions and found that the appellant indeed had a strong prima facie case. Therefore, the requirement of pre-deposit of duty demand, interest, and penalty was waived, and recovery was stayed until the appeals were disposed of.

Allegations of Improper Return of Materials:
The dispute centered around whether the material returned by the appellant to customers was the same as that originally received for job work or was from the stock of inputs purchased by the appellant for their own use. The department alleged that in several instances, the returned material was not the one received from customers but was from the appellant's stock of cenvated inputs. However, the Tribunal noted that there was no dispute that the inputs were returned to customers and were indeed the same material, albeit possibly from a different lot. The Tribunal concluded that even if the returned material was from the appellant's stock of inputs, it did not affect the revenue neutrality of the case. Lack of substantial evidence beyond a stock statement further supported the appellant's prima facie case.

Prima Facie Case of the Appellant:
The Tribunal carefully analyzed the appellant's manufacturing processes, including production for their own account and job work basis. It was established that the appellant received inputs under job work challans without taking Cenvat credit and returned unprocessed inputs to customers in certain cases. Despite the department's allegations, the Tribunal found that the appellant had a strong prima facie case. The Tribunal emphasized that the appellant's actions did not impact the revenue neutrality of the case, and the lack of concrete evidence against the appellant supported the decision to waive the pre-deposit requirement.

Revenue Neutrality of the Case:
The Tribunal highlighted that the case was revenue neutral, as even if duty was charged on the material returned to customers based on Cenvat credit taken, the appellant would still be eligible for Cenvat credit on materials not returned and used for manufacturing on their own account. This observation further reinforced the decision to waive the pre-deposit requirement. The Tribunal granted the stay application, emphasizing that the findings were prima facie and that recovery was stayed until the appeals were resolved.