2008 (3) TMI 166 - AT - Central Excise

Appellant manufactures Railway wagons with inputs (couplers & bogies) received from its sister unit - as per their contract with Railways, the amount over the excise duty remitted by manufacturers of bogies & couplers sourced by them would be reimbursed by the Railways as part of the cost of wagons supplied by the appellants Sec. 11D provides only for recovery of any amount collected by a manufacturer in excess of excise duty due, hence demand u/s 11D is not justified stay granted

Summary

Issues:
Waiver of pre-deposit and stay of recovery of excise duty and education cess totaling about Rs. 3.13 crores under Section 11D of the Central Excise Act.

Analysis:

1. Waiver of Pre-deposit and Stay of Recovery:
The appellant, M/s. Texmaco Ltd., sought waiver of pre-deposit and stay of recovery of excise duty and education cess amounting to Rs. 3.13 crores. The appellant's sister unit at Belgharia supplies couplers and bogies to the appellant, who manufactures railway wagons exempt from duty. The impugned demand was made under Section 11D of the Central Excise Act, alleging that the appellant collected the amount as excise duty. The appellant argued that the amount collected was part of the price of exempt goods supplied to Indian Railways and they were not liable to pay excise duty under the Act. The Tribunal found that the appellant had collected the amount as per the contract terms with the Railways, which described it as part of the wagon price. Consequently, the order for recovery was deemed unsound, leading to a full waiver of pre-deposit and stay of recovery until appeal disposal.

2. Interpretation of Section 11D:
The Departmental representative contended that the impugned order was legally sound, citing a case law where recovery was allowed when the amount collected was passed on to the buyer. However, in the present case, the appellant had collected the amount from Indian Railways, not the buyer. The Tribunal analyzed Section 11D, which applies to the collection of excess amounts represented as excise duty by a person liable to pay duty. Since the appellant was not liable to pay duty on the goods supplied, and the amount was collected as per the contract terms with Railways, the recovery order was found prima facie unsustainable. Therefore, the Tribunal granted a full waiver of pre-deposit and stay of recovery pending appeal, in line with the provisions of the Central Excise Act.

3. Different Factual Matrix:
The Departmental representative argued that the case law cited by the appellant involved a different factual scenario and was not directly applicable. In the cited case, the amount collected from the buyer was not recoverable under Section 11D. However, in the present case, the appellant collected the amount from Indian Railways as part of the wagon price, not from the buyer. The Tribunal distinguished the factual matrix of the cited case from the current situation, emphasizing that the appellant's collection was in line with the contract terms with Railways, which did not make them liable to pay excise duty. Consequently, the recovery order under Section 11D was found unsustainable, leading to the grant of a full waiver of pre-deposit and stay of recovery until appeal resolution.

This comprehensive analysis of the judgment highlights the key arguments, legal interpretations, and the Tribunal's decision regarding the waiver of pre-deposit and stay of recovery of excise duty and education cess in the case.