2012 (3) TMI 362 - AT - Central Excise

Waiver of pre deposit - Benefit of exemption Notification No. 56/2002-C.E. - Manufacture of pesticides - Held that - Notification No. 56/2002-C.E. provides exemption to the extent as mentioned in the notification by way of requiring the assessee to first pay the duty through PLA, if any payable, after exhausting the Cenvat credit available at the end of the month and it is the duty paid through PLA which is available as refund subject to the cap of duty on the value addition specified for the product in the notification which for the goods of Chpater 38 is 34%. It is also not the Department s allegation that the quantum of exemption availed is more than the duty payable on the specified value addition i.e. 34%. Thus even if the department s allegation that the appellant have inflated the production figures is accepted, the fact remains that the refund they have received in respect of the inflated production is of the duty which they had actually paid. It is also not the case where the goods cleared by the appellant to a downstream manufacturer have been used by him as input and on the basis of the invoices issued by the appellant, the downstream manufacturer has availed full Cenvat credit in respect of the exempted goods under Rule 12 of the Cenvat Credit Rules, 2004. Thus, so far as duty demand of Rs. 1,44,78,352 is concerned, we are of the prima facie view that the appellant have not benefited in any manner. Just because the inputs for the pesticides/insecticides are sub-standard, the Cenvat credit in respect of the same cannot be denied sofar as the same are duty paid, and have been received in the factory. Moreover, a manufacturer availing exemption under Notification No. 56/2002-C.E. will not gain anything by availing ineligible Cenvat credit and thus increasing the Cenvat credit available to him, as the duty exemption available to him depends upon the duty paid through PLA after exhausting the Cenvat credit at the end of the month and thus higher Cenvat credit means less quantum of exemption. - requirement of pre-deposit of duty demand, Cenvat credit demand, interest and penalty is waived for hearing for the appeal and recovery thereof is stayed till the disposal of the appeal - Stay granted.

Summary

Issues: Alleged inflation of production figures leading to higher quantum of exemption, Alleged recording of production during machinery repair period, Alleged wrongful availing of Cenvat credit.

In this case, the appellant, located in a specified area in Jammu & Kashmir, availed exemption under Notification No. 56/2002-C.E. for manufacturing pesticides. The exemption required utilizing Cenvat credit first for duty payment and then paying the balance in cash. The dispute period was from 2005-2006 to 17-7-2009. The allegations included inflating production figures, recording production during machinery repair, and wrongful availing of Cenvat credit. A show cause notice was issued, and the Commissioner confirmed duty demands, Cenvat credit demands, and imposed penalties. The appellant appealed against this order.

Regarding the allegation of inflating production figures, the appellant argued that even if production figures were inflated, they paid duty in cash based on actual production, and the refund received was of the duty actually paid. The Tribunal noted that the exemption availed was within the specified limit of duty on value addition. The Tribunal found that the appellant did not benefit from the alleged inflation of production figures as the duty paid through PLA was refunded.

Regarding the wrongful availing of Cenvat credit, the Tribunal observed that the demand was based on sub-standard inputs as per test reports. However, the Tribunal held that availing ineligible Cenvat credit would not benefit the manufacturer availing exemption under Notification No. 56/2002-C.E. as the duty exemption depended on duty paid through PLA after exhausting Cenvat credit. Therefore, higher Cenvat credit would result in less exemption. The Tribunal waived the pre-deposit of duty demand, Cenvat credit demand, interest, and penalty for the appeal hearing and stayed the recovery until the appeal's disposal.

In conclusion, the Tribunal allowed the stay application, finding that the appellant did not benefit from the alleged inflation of production figures and that availing ineligible Cenvat credit would not provide any advantage under the exemption notification.