2012 (11) TMI 372 - AT - Central Excise

Cenvat credit - motor vehicles cleared by the appellant to a dealer for further sale to Diplomatic Missions - Motor vehicles were cleared on payment of duties of excise which include special excise duty - purchaser (German Consulate) filed a claim for refund of basic excise duty same was granted - department treated the motor vehicles as exempted goods by virtue of the said Notification and invoked Rule 6(3)(b) for recovery of 10% by alleging that they were clearing both dutiable and exempted goods during the material period Held that - Motor vehicles in question were cleared on payment of duty and hence, prima facie, the same cannot be considered to be exempted goods . Rule 6(3)(b) is prima facie not applicable - pre-deposit waived

Summary

Issues:
1. Interpretation of Rule 6(3)(b) of the Cenvat Credit Rules 2004 regarding the classification of motor vehicles cleared to a dealer for further sale to Diplomatic Missions.
2. Application of Notification No. 6/2006-C.E. (Sl. No. 81) granting exemption from duty on motor vehicles bought by Foreign Diplomats and Consular Missions.
3. Allegation of clearing both dutiable and exempted goods leading to recovery under Rule 6(3)(b).
4. Consideration of waiver of pre-deposit and stay of recovery in light of the submissions made by the appellant's counsel.

Analysis:

1. The central issue in this case revolves around the interpretation of Rule 6(3)(b) of the Cenvat Credit Rules 2004 concerning the classification of motor vehicles cleared by the appellant to a dealer for further sale to Diplomatic Missions. The appellant had cleared the motor vehicles on payment of duties of excise, including special excise duty. The dispute arose when the ultimate purchaser, the German Consulate, filed a claim for refund of basic excise duty based on Notification No. 6/2006-C.E. (Sl. No. 81), which exempted duty on motor vehicles purchased by Foreign Diplomats and Consular Missions. The department treated the motor vehicles as 'exempted goods' under the said Notification and invoked Rule 6(3)(b) for recovery of 10% of the price of these goods from the appellant, alleging the clearance of both dutiable and exempted goods during the material period.

2. The appellant's counsel contended that the demand raised on the appellant was factually and legally incorrect, emphasizing that the motor vehicles in question were cleared on payment of duty, with a portion of the duty not even claimed as a refund. The Tribunal carefully considered the submissions and found merit in the appellant's arguments. It was established that the motor vehicles were indeed cleared on payment of duty, thereby prima facie excluding them from the classification of 'exempted goods.' Consequently, Rule 6(3)(b) was deemed prima facie inapplicable, leading to the decision to waive the pre-deposit and stay the recovery of dues adjudged against the appellant.

3. The Tribunal's decision to grant waiver of pre-deposit and stay of recovery was based on the fundamental premise that the motor vehicles were cleared on payment of duty, thereby negating their classification as 'exempted goods' under Rule 6(3)(b). By carefully analyzing the factual and legal aspects of the case, the Tribunal concluded that the appellant's position was well-founded, warranting relief from the erroneous demand raised by the department. This judgment underscores the importance of accurate interpretation and application of statutory provisions in resolving disputes related to the classification and taxation of goods under the excise regime.