2013 (1) TMI 583 - AT - Central Excise

Waiver of pre-deposit - Applicants are engaged in the manufacturing of sponge iron - During process of manufacturing of sponge iron , flue gas is generated - For cooling down the said gas, the Water Heat Recovery Boiler is installed Assessee claimed it as a pollution control device - Rule 2(a)(A)(ii) of CENVAT Credit Rules, 2004 Held that - Primafacie, agree with the assessee that they are entitled to CENVAT credit on the Water Heat Recovery Boiler . Steam has been generated during the course of cooling down of flue gases - The steam, so generated is sold by the applicants without payment of duty - Notification No. 6/2002-C.E Revenue demanding payment of an amount equal to 10%/5% of the value of the exempted goods - Rule 6(3)(i) of die CENVAT Credit Rules, 2004 Held that - Following the decision in case of HI-TECH CARBON (2003 (3) TMI 238 - CEGAT, NEW DELHI) that that the above gases are burnt out, which generate heat and in turn the same is used in the boiler to generate steam. No doubt, the steam has been generated by the applicants as a conscious act but it cannot be claimed by the Revenue that any part of the inputs has gone into the manufacture of steam Applicants have made out a case for 100% waiver of pre-deposit. In favour of assessee

Summary

Issues:
Waiver of pre-deposit of demands adjudged under Rule 6(3)(i) of CENVAT Credit Rules, 2004, disallowance of CENVAT Credit on ineligible capital goods, demand of interest, penalty under CENVAT Credit Rules, 2004.

Analysis:
The case involved the applicants seeking waiver of pre-deposit of various demands. The demands included an amount equal to 10%/5% of the value of exempted products, disallowance of CENVAT Credit on ineligible capital goods, demand of interest, and penalty under the CENVAT Credit Rules, 2004. The applicants were engaged in manufacturing 'sponge iron' and used various inputs in the manufacturing process. They availed CENVAT Credit on duty/service tax paid on lubricants, chemicals, and taxable services. A show cause notice was issued for disallowance of CENVAT Credit on 'Waste Heat Recovery Boiler' and payment of an amount equal to the value of exempted goods, i.e., steam. The demands were confirmed, leading the applicants to seek waiver of pre-deposit.

The applicants argued that the 'Waste Heat Recovery Boiler' was essential for pollution control and entitled them to CENVAT Credit. They contended that the steam generated during the manufacturing process of 'sponge iron' was not liable to excise duty as no credit was taken on inputs for steam generation. They cited a precedent to support their case. The Revenue opposed, stating that the steam was sold by the applicants and thus, the denial of CENVAT Credit was justified.

The Tribunal considered the submissions and found the applicants entitled to CENVAT Credit on the 'Waste Heat Recovery Boiler' as a pollution control device. Regarding the steam generation issue, the Tribunal referred to a previous case and agreed that no part of the inputs went into the manufacture of steam. Following the precedent decision, the Tribunal concluded that the applicants had a case for waiver of pre-deposit of the demands.

Consequently, the Tribunal granted 100% waiver of pre-deposit of the demands, interest, and penalty, staying the recovery during the appeal's pendency. The operative part of the order was pronounced on a specific date.

This detailed analysis of the judgment highlights the issues involved, the arguments presented by both parties, the Tribunal's considerations, and the final decision granting waiver of pre-deposit to the applicants.