2015 (3) TMI 1086 - AT - Central Excise

Waiver of pre deposit - Denial of exemption claim - Held that - While initially, when the appellant had started the manufacture of tubular poles in the year 2005, they had been allowed to avail of benefit of Notification No. 56/02-CE by treating their process as amounting to manufacture. It is only in view of Apex Court s judgment dated 27/3/06 in the case of Hindustan Poles Corporation vs. CCE, Kolkata (2006 (3) TMI 2 - SUPREME COURT ), that the Additional Commissioner vide order-in-original dated 31/3/08 cancelled the appellant s registration certificate and at the same time while rejecting the refund claim under Notification No. 56/02-CE for March and April 2006, also demanded Cenvat credit of ₹ 12,14,590/- in respect of inputs. - There is no dispute that the Apex Court in its subsequent judgment dated 28/3/08 in the case of Prachi Industries vs. CCE, Chandigarh (2008 (3) TMI 25 - Supreme court) reversed its earlier ruling in the case of Hindustan Poles Corporation vs. CCE, Kolkata. (supra) and has held that making tubular poles by joining duty paid price of different diameters by welding would amount to manufacture. In this background there would be no justification for imposition of penalty. - It is seen that the bulk of the duty demand of ₹ 61,74,218/- for the period from January 2012 to November 2012 and December 2012 to June 2013 is within normal limitation period. However, as held by Joint Commissioner, the appellant would also be entitled for Cenvat credit of ₹ 36,15,915/- and as such the net duty payable would be only ₹ 25,58,303 - this is not the case for total waiver - Partial stay granted.

Summary

Issues:
1. Whether the fabrication of steel tubular poles by joining steel pipes of different diameters amounts to manufacture.
2. Validity of the Additional Commissioner's order cancelling registration, rejecting refund claim, and imposing penalties.
3. Correctness of the duty demand, interest, and penalties imposed by the Joint Commissioner.
4. Applicability of Cenvat credit and exemption under Notification No. 56/02-CE.

Analysis:

1. The appellant, a manufacturer of steel tubular poles, faced issues regarding the classification of their manufacturing process as 'manufacture' following conflicting judgments by the Apex court. The Additional Commissioner's order cancelling registration and rejecting refund claims was based on the initial judgment, which was later reversed by a subsequent judgment. The Tribunal observed that the process of joining duty paid pipes of different diameters by welding constitutes manufacture as per the later judgment, rendering the penalties imposed unjustified.

2. The Additional Commissioner's order, which led to the appellant's cessation of duty payments, was based on an outdated interpretation of the law. Despite a subsequent judgment clarifying the manufacturing process, the Department issued show cause notices years later, demanding substantial duty amounts, interest, and penalties. The Tribunal noted the lack of corrective action by the Department post the clarifying judgment, questioning the imposition of penalties for alleged suppression of facts when the initial cancellation of registration was based on a different legal understanding.

3. The Joint Commissioner confirmed a significant duty demand against the appellant, along with interest and penalties. The Tribunal acknowledged the normal limitation period for most of the duty demand but emphasized the appellant's entitlement to Cenvat credit, reducing the net duty payable. The Tribunal directed the appellant to deposit a specified amount, considering the potential exemption under Notification No. 56/02-CE, indicating a need for further examination during the final hearing.

4. The Tribunal's decision balanced the appellant's prima facie case with the requirement for a partial deposit, acknowledging the potential exemption under the notification and the entitlement to Cenvat credit. By directing a partial deposit and waiving the pre-deposit requirement for the balance amount, the Tribunal ensured a fair consideration of the issues at the final hearing while addressing the immediate financial obligations of the appellant.

This comprehensive analysis highlights the legal complexities, procedural history, and the Tribunal's approach to resolving the issues raised in the judgment.