2012 (10) TMI 105 - AT - Central Excise

Waiver of pre-deposit final products were manufactured and cleared without discharging the obligation prescribed under Rule 6 of Cenvat Credit Rules, 2001, the department was of the view that the benefit under the captive consumption notification was not available Held that - Assessees prima facie were not required to discharge the obligation prescribed under Rule 6 of Cenvat Credit Rules, 2001 as they were covered by clause (vii) of Rule 6(6), which stipulates that the provisions relating to payment of 10% or 5% as the case may be were not required to be followed as the goods were supplied against I.C.B. in terms of Notification No. 6/02 or 6/06 and therefore, exempted from levy of duty of customs and additional duty as per clause (vii) of Rule 6(6) of the Cenvat Credit Rules - pre-deposit of duty, interest and penalty waived

Summary

Issues:
Waiver of pre-deposit of total duty, denial of benefit of exemption under Notification No. 69/95-C.E., applicability of Notification No. 67/95, obligation under Rule 6 of Cenvat Credit Rules, 2001.

Analysis:

The judgment by the Appellate Tribunal CESTAT, CHENNAI, involved a case where the appellant sought a waiver of pre-deposit of total duty amounting to Rs. 11,85,75,230/- along with interest and a penalty arising due to the denial of exemption under Notification No. 69/95-C.E. The issue revolved around the clearance of steel pipes by the assessee to unit No. 2, which availed input credit for final products cleared without duty payment under Notification No. 6/2006 for goods supplied against International Competitive Bidding Project (I.C.B.). Subsequently, both units were merged, and the factory availed exemption under Notification No. 67/95 for captively used steel pipes. The department objected, stating that since final products under I.C.B. were cleared without duty payment, the benefit of Notification No. 67/95 was not admissible to the assessee.

The crux of the matter lay in the interpretation of Notification No. 67/95, which excluded the application of the notification to inputs used in manufacturing final products exempt from duty or chargeable at a nil rate, except in specific circumstances outlined in the notification. The department contended that since the final products were cleared without discharging obligations under Rule 6 of Cenvat Credit Rules, 2001, the benefit of captive consumption notification was not available. However, the Tribunal found that the assessee was covered by clause (vii) of Rule 6(6), exempting them from payment obligations as the goods were supplied against I.C.B. under Notification No. 6/02 or 6/06. Consequently, the Tribunal held that the assessee had established a prima facie case on merits, leading to the waiver of pre-deposit of duty, interest, and penalty pending the appeal.

In conclusion, the Tribunal's decision centered on the proper interpretation of the relevant notifications and rules governing duty payment and exemptions. By analyzing the specific provisions of Notification No. 67/95 and Rule 6 of Cenvat Credit Rules, 2001, the Tribunal determined the eligibility of the assessee for exemption, ultimately granting a waiver of pre-deposit based on the prima facie case made by the appellant regarding the applicability of the exemption notification in the given circumstances.