2000 (5) TMI 226 - AT - Central Excise

Summary

Issues:
1. Whether the sale of a division to a Joint Venture Company constitutes removal of capital goods and raw materials, requiring duty payment.
2. Interpretation of Rules 57F(3) and 57S(1)(ii) regarding duty payment on removal of inputs/capital goods.
3. Determining if the change of ownership of a division constitutes removal as per Rule 9 and Rule 49.
4. Applicability of duty payment when inputs are transferred to another entity for further manufacturing.
5. Consideration of Revenue Neutral scenario in duty payment disputes.
6. Whether pre-deposit of duty and penalty should be waived in cases of Revenue Neutral transactions.

Analysis:
1. The case involved a dispute where a division of a company was sold to a Joint Venture Company, leading to a demand for duty payment by the Department on the alleged removal of capital goods and raw materials. The appellant argued that the change of ownership did not constitute removal as per relevant rules and that the duty would have been available as credit to the Joint Venture Company if paid.

2. The appellant's counsel referred to Rules 57F(3) and 57S(1)(ii) governing duty payment on removal of inputs/capital goods, emphasizing that the situation did not meet the criteria for duty payment under Rule 9 and Rule 49. It was highlighted that no actual removal for consumption, export, or manufacturing of other goods occurred, as the goods remained within the same premises during the ownership transfer.

3. The Department contended that the sale of the division and registration of a new unit constituted removal of raw materials, capital goods, and finished products, justifying the duty demand. The authorities upheld the duty demand, arguing that the ownership change involved removal of goods.

4. Upon reviewing the submissions and evidence, the Tribunal found that the transaction appeared to be Revenue Neutral, indicating that the duty payment by the appellant would have been offset as credit by the Joint Venture Company. Citing relevant case law, the Tribunal ruled in favor of the appellant, waiving the pre-deposit of duty and penalty due to the Revenue Neutral nature of the transaction.

5. The Tribunal's decision was based on the principle that in Revenue Neutral cases, where duty payment does not result in a net loss to the exchequer, pre-deposit of duty and penalty can be dispensed with. The judgment referenced previous decisions supporting this approach, ultimately allowing the stay petition in favor of the appellant based on the Revenue Neutral assessment.