2013 (12) TMI 692 - AT - Central Excise

Cenvat credit taken on inputs used for the manufacture of high precision tools - Waiver of Pre-deposit Held that - The screws, inserts and cartridges, whether imported or procured indigenously, were cleared in assembled condition with the finished products and Central Excise duty was paid on such assembled goods on its transaction value - the Central Excise duty so paid was always higher than the CENVAT credit on inputs utilized - Central Excise duty on transaction value was paid on the imported inputs cleared as such from the factory and that such duty was also higher than the CENVAT credit taken of CVD. The amount of duty paid by the appellant on finished goods or on inputs cleared as such is higher than the CENVAT credit taken on inputs, a situation better than revenue-neutral exists and no intent to avail undue benefit of CENVAT credit can be attributed to the appellant Pre-deposits waived till the disposal Stay granted.

Summary

Issues:
Waiver and stay in respect of adjudged dues under Rule 14 of CENVAT Credit Rules, 2004 read with proviso to Section 11A(1) of Central Excise Act.

Analysis:
The appellant sought waiver and stay concerning the adjudged dues amounting to over Rs. 10.47 crores demanded under Rule 14 of the CENVAT Credit Rules, 2004 read with the proviso to Section 11A(1) of the Central Excise Act. The duty in question represented the CENVAT credit taken by the appellant on inputs used in a process claimed to be the manufacture of high precision cutting tools during the material period from April 2005 to January 2010. The appellant imported screws, inserts, and cartridges and cleared them after paying Customs duties, subsequently utilizing them as parts of final products cleared to customers. The duty on final products was paid partly by utilizing CENVAT credit and partly from PLA. The appellant argued that the Central Excise duty paid on finished goods was always higher than the CENVAT credit taken on inputs, whether imported or indigenous. The Commissioner argued that the appellant was essentially importing and trading screws, inserts, and cartridges, which formed the basis of the demand.

The Tribunal found a prima facie case in favor of the appellant for several reasons. Firstly, it was acknowledged that screws, inserts, and cartridges were cleared in assembled condition with finished products, with Central Excise duty paid on the transaction value of such goods. Secondly, the duty paid was consistently higher than the CENVAT credit on inputs used. Thirdly, Central Excise duty was paid on the imported inputs cleared 'as such' from the factory, with the duty being higher than the CENVAT credit taken. The Tribunal noted that previous decisions supported the idea that CENVAT credit could not be denied on inputs where an equal or higher amount was reversed at the time of clearance 'as such'. Given that the duty paid on finished goods or on inputs cleared 'as such' exceeded the CENVAT credit taken, the Tribunal concluded that the appellant did not intend to avail undue benefit of CENVAT credit, indicating a situation better than revenue-neutrality and a strong case on limitation as well.

As a result of the analysis, the Tribunal granted waiver of pre-deposit and stay of recovery concerning the adjudged dues.