2011 (1) TMI 738 - AT - Central Excise

Application for stay - Payment of duty on non dutiable goods - Demand - Ignorance of law - The contention in the present case on behalf of the department is that once the credit availed is allowed to be utilized for payment of duty the benefit thereunder accrues to two parties, one to the manufacturer of the final product himself and another to the purchaser of the such product, in cases where the final product is not dutiable and yet the duty is sought to be paid - once the manufacturer who is not entitled in terms of the provision of law to get reimbursement for the duty amount paid by him for the inputs, the cenvat credit thereof being not available, his final product is exempt from payment of duty, yet he gets such reimbursement by allowing to avail the credit on the ground that he pays the duty on final payment product which ultimately is reimbursed by the buyer and at the same time retain the same, while also avails the cenvat credit on inputs - Decided against the assessee by way of direction to deposit the demand

Summary

Issues:
Application for stay of order dated 26-2-2010 | Demand confirmation by Additional Commissioner | Interpretation of lamination/metallization process | Applicability of cenvat credit | Exemption of final product from duty | Gujarat High Court decision on modvat credit | Transfer of duty liability to purchaser | Unjust enrichment of manufacturer | Prima facie case for waiver of demanded amount.

Analysis:
The judgment pertains to an application for stay of an order confirming a demand against the appellants for a specific amount along with interest and penalty. The demand was related to the period of November and December 2007, concerning the manufacture of printed plastic pouch rolls. The department contended that lamination/metallization did not constitute manufacturing, and thus, no cenvat credit on duty paid inputs was admissible. The appellants argued that a similar case ruled by the Gujarat High Court supported their position, emphasizing that if duty is paid by utilizing credit during a non-manufacturing activity, no grievance could be made about the credit availed. The judgment highlighted the exemption of the final product from duty during the relevant period, as confirmed by previous court decisions.

The Gujarat High Court's decision in Creative Enterprises was cited, emphasizing that if an activity does not amount to manufacture, there should be no levy of duty, and modvat credit cannot be denied. The judgment discussed the issue of transferring duty liability to the purchaser and the potential for unjust enrichment of the manufacturer. It was argued that allowing the manufacturer to avail cenvat credit on non-dutiable products results in double benefits and unjust enrichment. The judgment concluded that the appellants failed to establish a prima facie case for a total waiver of the demanded amount, requiring them to deposit the main amount within a specified timeframe while waiving interest and penalty during the appeal's pendency.

In summary, the judgment analyzed various legal aspects, including the interpretation of manufacturing processes, applicability of cenvat credit, exemption of final products from duty, and the potential for unjust enrichment. The decision referenced relevant court rulings and legal provisions to determine the liability of the appellants and the validity of the demand confirmed by the Additional Commissioner.