1998 (4) TMI 326 - AT - Central Excise

Summary

Issues:
1. Demand of duty and penalty confirmation by the Commissioner.
2. Interpretation of marketability of yeast propagated in the reaction vessel.
3. Calculation of duty liability and Modvat credit eligibility.
4. Satisfaction of conditions for full exemption under Exemption Notification No. 217/86.

Analysis:
1. The Appellant, engaged in alcohol manufacturing, contested the demand of duty and penalty confirmed by the Commissioner amounting to Rs. 29,61,025/- and Rs. 15,00,000/- respectively. The demand was related to the period from August 1990 to June 1995 under the proviso to Section 11A of the Central Excise Act, 1944. The Appellant sought a waiver of the pre-deposit requirement under Section 35F of the Act.

2. The main issue revolved around the marketability of yeast propagated in the reaction vessel during the alcohol manufacturing process. The Commissioner relied on HSN Explanatory Notes to determine that the propagated yeast constituted excisable goods. The Appellant argued that the yeast in wash form had no shelf life and was not marketable, contrary to the Commissioner's interpretation based on bakers' yeast classification.

3. Discrepancies arose in the calculation of duty liability as the Commissioner did not deduct the quantity of duty paid bought out yeast initially used. The Appellant contended that after adjustments, the net duty liability would be significantly lower, around Rs. 5 lakhs. Additionally, the Appellant claimed eligibility for Modvat credit on the duty paid for the bought out yeast, further reducing the effective duty liability. The Respondent contested the proportion of yeast used versus propagated by the Appellant.

4. The Appellant asserted that the conditions for full exemption under Exemption Notification No. 217/86 were met, which the Commissioner did not address or provide findings on. Referring to a Supreme Court decision on a similar notification, the Appellant argued for complete exemption from duty payment. The Tribunal found the Appellant's contentions regarding marketability and exemption prima facie arguable, leading to the waiver of the pre-deposit requirement and a stay on the recovery of duty and penalty.

In conclusion, the Tribunal granted the Appellant's application, allowing the waiver of pre-deposit and staying the recovery of duty and penalty pending further proceedings.