2009 (12) TMI 819 - AT - Central Excise

Summary

Issues:
1. Liability of duty on intermediate products used in manufacturing fully exempted goods.
2. Applicability of Notification No. 67/95-C.E. on intermediate goods.
3. Validity of duty payment by the appellant on finished products.
4. Rebate claim and its impact on duty payment.

Analysis:
1. The issue in this case revolves around the liability of duty on intermediate products used in manufacturing fully exempted goods. The appellants, engaged in manufacturing aluminum tableware and kitchenware, paid duty on finished products even though they were fully exempted under Notification No. 10/03-C.E. The Revenue contended that duty should not have been paid on finished goods as they were exempted, but duty on aluminum circles (intermediate product) was liable during that time. The impugned order confirmed a duty demand of over Rs. 1.3 crores against the appellant for utilizing aluminum circles in manufacturing exempted goods.

2. The applicability of Notification No. 67/95-C.E. on intermediate goods was another crucial point of contention. The appellant argued that they had the option to pay duty before the amendment to Section 5A of the Central Excise Act, 1944, and had claimed rebate on excise duty paid on finished products. The Board's clarifications were cited to support the appellant's position that no duty should be collected on intermediate goods used in manufacturing finished excisable goods exported under bond.

3. The validity of duty payment by the appellant on finished products was extensively discussed. The Department argued that duty paid on finished products should be treated as a deposit since they were exempted, relying on a Tribunal decision. However, the Tribunal found that the rebate sanctioned to the appellant indicated that the payment was indeed Central Excise duty, making the appellants eligible for exemption under Notification No. 67/95-C.E. The Tribunal emphasized that the entire exercise was revenue-neutral, as the appellants would have been eligible for a rebate even if duty was not paid on finished products.

4. Lastly, the impact of the rebate claim on duty payment was crucial to the resolution of the case. The Tribunal noted that the Department's contention regarding the nature of the payment made by the appellant was incorrect, as the rebate sanctioned was for excise duty. The Tribunal ultimately allowed the appeal, providing consequential relief to the appellants, and disposed of the cross objection filed by the Revenue.

This detailed analysis of the judgment highlights the complex legal arguments and interpretations surrounding the liability of duty on intermediate products, the application of relevant notifications, the validity of duty payment, and the significance of rebate claims in excise duty matters.