2015 (11) TMI 1476 - AT - Central Excise

Waiver of pre deposit - Exemption under Notification No. 6/02-CE - Use of fly ash more than 25% - The Department s contention is that the pipes in respect of which the exemption under Notification No. 6/02-CE dated 1/3/02 (Sl. No. 158) has been availed either do not contain fly ash or the fly ash content is much less than 25% and, hence, the same do not qualify for exemption - retraction of statements - Held that - Though, the appellant plead that under the law, the appellant could use fly ash upto 40% in manufacture of AC Pressure Pipes and since the fly ash is free, while cement is much costlier, there was absolutely no incentive for the appellant company to use cement instead of fly ash. But fly ash is free only for those users who are located in close vicinity of the source of fly ash. For the appellant company, whose factory located at Bhilwara is at considerable distance of about 200 k.m. from the Kota and Suratgarh Thermal Power Plants, there would be transportation cost involved, besides the cost of loading at the Thermal Power Plants and also the cost of storage in the appellant company s factory which may involve constant spraying of water. In absence of data regarding transportation cost, loading cost and unloading and storage cost, the plea that fly ash is absolutely free and therefore there would be no incentive not to use it to the extent permitted, cannot be examined. Undue hardship to the assessee would exist only when on the basis of the evidence on record there is absolutely no case of the duty evasion/non-payment of duty against the assessee, while in this case this is not so. Therefore, on the basis of the twin consideration of undue hardship and safeguarding the interest of Revenue, this is not the case which would merit total waiver from compliance with the provision of Section 35F. - Partial stay granted.

Summary

Issues Involved:
1. Eligibility for exemption under Notification No. 6/02-CE.
2. Compliance with conditions for exemption.
3. Validity of evidence and statements.
4. Financial hardship and pre-deposit requirements.
5. Imposition of penalties.

Detailed Analysis:

1. Eligibility for Exemption Under Notification No. 6/02-CE:
The appellant company, engaged in manufacturing Asbestos Cement Pressure Pipes, claimed exemption under Notification No. 6/02-CE dated 01/03/02, which exempts pipes made using not less than 25% fly ash by weight. The Department denied this exemption, asserting that the pipes either did not contain fly ash or contained less than the required 25%.

2. Compliance with Conditions for Exemption:
The appellant maintained records and filed monthly returns regarding the receipt and use of fly ash. However, the Department alleged these records were false, based on statements from officials of Kota Thermal Power Plant and transporters, who denied supplying or transporting fly ash to the appellant. The Tribunal noted discrepancies in the weighment slips produced by the appellant and the records of the Dharamkanta.

3. Validity of Evidence and Statements:
The Department relied on statements from Assistant Engineers of Kota Thermal Power Plant, transporters, and truck owners, all denying the supply or transportation of fly ash to the appellant. The Tribunal found the Assistant Engineers' statements of doubtful value due to lack of record-keeping at the power plant, as revealed by RTI information. The Tribunal also noted that while some transporters retracted their statements, the statements of 93 truck owners corroborated the initial claims.

4. Financial Hardship and Pre-Deposit Requirements:
The appellant claimed financial hardship, presenting balance sheets showing a decline in net profit and significant loan liabilities. The Tribunal considered the financial hardship but also the need to safeguard revenue interests. Consequently, the Tribunal directed the appellant to deposit Rs. 1,65,00,000/- within eight weeks, waiving the requirement of pre-deposit for the balance amount, interest, and penalty.

5. Imposition of Penalties:
Penalties were imposed on the appellant company, its Managing Director, Chief General Manager, and associated transporters. The Tribunal found no prima facie case for imposing penalties on the Chief General Manager and transporters under Rule 26 of the Central Excise Rules, 2002, and waived the requirement of pre-deposit for them.

Conclusion:
The Tribunal directed the appellant company to deposit Rs. 1,65,00,000/- within eight weeks, waiving the requirement of pre-deposit for the remaining amounts and penalties. The stay applications for the Chief General Manager and transporters were allowed, with no pre-deposit required for hearing their appeals. The case highlighted issues of compliance with exemption conditions, validity of evidence, and financial hardship considerations in pre-deposit requirements.