2013 (3) TMI 405 - AT - Central Excise

Denial of credit of duty paid on intermediate products - non follow of prescribed procedure under Notification No. 44/2001-CE (NT) dated 26.6.2001 as amended by Notification No. 32/2003 dated 9.4.2003 and Notification No. 23/2009 dated 25.9.2009 - Held that - The manufacturers cleared the goods on payment of duty and the applicants availed the credit. Further, the allegation of collusion between the applicants and manufacturer-suppliers is in the show-cause notice, however, the manufacturer-suppliers have not been made party to the present proceedings. In these circumstances, the allegation of collusion is also not sustainable. As the manufacturers, who cleared the goods on payment of duty, are not party in the present proceedings and the applicants have only availed the credit of duty paid hence prima facie the applicants have a strong case for waiver of pre-deposit of dues. Accordingly, the pre-deposit of dues is waived and recovery of the same is stayed during pendency of the appeals. Stay petitions are allowed.

Issues involved: Stay petitions for waiver of pre-deposit of duty, interest, and penalty under Notification No. 44/2001-CE (NT) dated 26.6.2001.

Analysis:

1. Common Issue and Background: The Appellate Tribunal CESTAT MUMBAI considered two stay petitions filed by M/s Fine Organics (India) Pvt. Ltd. and M/s Oleofine Organics (India) Pvt. Ltd. for the waiver of pre-deposit of duty, interest, and penalty. Both applicants are engaged in the manufacture of Organic Chemicals. The demands were confirmed after denying the credit of duty paid on intermediate products supplied by M/s Godrej Industries Ltd. and M/s. VVF Ltd.

2. Allegations and Legal Provisions: The Revenue contended that the applicants did not follow the prescribed procedure under Notification No. 44/2001-CE (NT) and should have procured indigenous raw materials duty-free from local suppliers under Advance Licence/Authorization letter. It was alleged that the local suppliers colluded with the applicants by transferring their accumulated CENVAT Credit through supplying materials on payment of duty, contrary to the conditions of the Notification.

3. Interpretation of Notification No. 44/2001: The Tribunal examined Notification No. 44/2001, which is a conditional notification providing procedures for the removal of excisable goods without payment of duty for manufacturing resultant articles. It was noted that the notification is issued under Rule 19 of the Central Excise Rules, and the manufacturer must adhere to the prescribed procedure to avail benefits. Since the manufacturers did not follow the procedure and cleared goods on payment of duty, they were not prima facie entitled to the Notification's benefits.

4. Collusion Allegations and Decision: The show-cause notice alleged collusion between the applicants and manufacturer-suppliers, but the manufacturer-suppliers were not party to the proceedings. Therefore, the allegation of collusion was deemed unsustainable. As the manufacturers cleared goods on duty payment and the applicants only availed the credit, the Tribunal found a strong case for waiver of pre-deposit of dues. Consequently, the pre-deposit of dues was waived, and recovery stayed during the appeals' pendency.

5. Final Directions: Considering the significant amount in dispute exceeding Rs. 1 crore, the Registry was directed to list the appeals for final hearing on a specified date. The Tribunal allowed the stay petitions and provided relief to the applicants based on the analysis of the legal provisions and factual circumstances presented during the proceedings.

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