2014 (4) TMI 598 - AT - Central Excise

Waiver of pre-deposit of duty - Levy of duty - Intermediate product - partially processed Naptha, namely CLS - Residual Fuel Gas(RFG) as an intermediate excisable product, manufactured out of cracking Naptha - Held that - duty is not payable on partially processed CLS and the Applicant were eligible to avail the procedure laid down under Rule 57AC of Central Excise Rules or Rule 4(5)(a) of CENVAT Credit Rules, 2001/2002 during the said period. w - Applicant could able to make out a prima facie case for total waiver of dues adjudged - Stay granted.

Summary

Issues:
Application seeking waiver of pre-deposit of duty and penalty under Section 11AC of Central Excise Act, 1944 for removal of Residual Fuel Gas (RFG) generated out of cracking of Naptha.

Analysis:
The case involved the Applicant seeking waiver of pre-deposit of duty and equivalent penalty imposed under Section 11AC of Central Excise Act, 1944, amounting to Rs.10,67,40,103/-, for the removal of Residual Fuel Gas (RFG) generated from cracking Naptha. The Applicant had sent the RFG to another company for electricity and steam generation, following specific procedures. The Revenue alleged that RFG, being an intermediate excisable product, was classifiable under chapter sub-heading No.2711.90 and required duty payment. A show cause cum demand notice was issued, leading to confirmation of demand and penalty by the Commissioner.

The Applicant argued that the RFG was cleared as 'inputs after being partially processed' under relevant Rules, allowing for specific procedures to be followed. Referring to a previous Tribunal order in their own case, the Applicant contended that they were entitled to avail the procedures laid down under the respective Rules. The Revenue maintained that RFG was a finished excisable good, not covered by the mentioned Rules for partially processed inputs.

Upon considering both sides, the Tribunal analyzed whether the RFG sent for electricity and steam generation, then returned for final product manufacturing, was liable to excise duty. The Tribunal referred to its previous judgment on a similar issue involving partially processed Naptha, where it was held that duty was not payable on such goods, and the procedures under the Rules could be availed. The Tribunal found the reasoning of the Commissioner, stating the cases were different, unacceptable. It noted that the issues in both cases were similar, differing only in the product (CLS or RFG), both generated from cracking Naptha for electricity and steam generation.

After detailed discussion, the Tribunal held that the Applicant was entitled to take Cenvat credit on the duty paid on Naphtha sent for electricity or steam generation, and no relevant facts were suppressed. Consequently, the extended period of limitation could not be invoked, and there was no basis for penalty imposition due to the interpretative nature of the case. As the Applicant made out a prima facie case for total waiver of dues adjudged, the pre-deposit of all dues was waived, and recovery stayed during the appeal's pendency. The Stay Application was allowed, and the judgment was pronounced on 7.1.2013.