2007 (6) TMI 78 - AT - Central Excise

Demand - Department contended that appellant has not manufactured any goods and accordingly liable to reverse the credit utilised for payment of duty - Held that department contention was not correct and set aside

Summary

Issues:
1. Rectification of Stay Order
2. Eligibility of credit for duty paid on imported goods
3. Manufacturing process and value-addition
4. Financial accommodation obtained by taking credit
5. Substantiation of manufacturing of goods

Analysis:

Rectification of Stay Order:
The appellants filed a Miscellaneous Application for rectification of the Stay Order, claiming a mistake due to facts getting mixed up with another case. The Bench dismissed the application as the appeal was already listed for hearing, rendering the application inconsequential.

Eligibility of credit for duty paid on imported goods:
The appellants imported defective refractory bricks, filed necessary declarations, and took credit of the Additional Duty of Customs. They argued that even if no manufacturing took place, they were eligible to clear the inputs under Rule 57F(2) after reversing the credit. The Tribunal found merit in the appellants' argument, citing a previous decision allowing credit in similar circumstances.

Manufacturing process and value-addition:
The appellants claimed a 10% value-addition during the manufacturing process, resulting in paying more duty than the credit availed. The Tribunal accepted this claim, emphasizing that the duty paid exceeded the credit, making any further demand against the appellants unsustainable.

Financial accommodation obtained by taking credit:
The Department argued that by taking credit without manufacturing any goods, the appellants obtained financial accommodation, which is impermissible under the law. However, the Tribunal found no evidence to support this claim and noted that the duty paid exceeded the credit, negating the Department's argument.

Substantiation of manufacturing of goods:
The Department contended that no goods were manufactured by the appellants, and there was no indication of defects or damages on the invoices. The Tribunal disagreed, stating that the lack of evidence to substantiate the Department's claim, coupled with the appellants' payment of higher duty than the credit taken, led to the decision to set aside the impugned Order and penalty, granting consequential benefits to the appellants. The Cross Objection filed by the Department was also disposed of in the appellants' favor.