2012 (11) TMI 245 - AT - Central Excise

Removal of scrap and waste - denial of benefit of Rule 4 (5) (a) of the Cenvat Credit Rules, 2004 - application seeking waiver of pre-deposit with interest and equal amount of penalty - Held that - The issue raised in this appeal is interpretation of Cenvat Credit Rule 4 (5) (a) of the Cenvat Credit Rules, 2004, which requires serious consideration. Otherwise also even if the argument of the respondent department is accepted, the entire exercise is Revenue neutral as the job worker would have been entitled to avail Cenvat credit of the duty paid by him and the appellant would also be entitled to Cenvat credit of duty paid on the brass wire manufactured by the job worker and returned to the appellant. Thus appellant has a prima facie case for waiver of condition of pre-deposit. Stay application is, therefore, allowed and condition of pre-deposit of duty demands, interest and penalty is waived, for hearing of the appeal and recovery thereof is stayed till the disposal of the appeal - in favour of assessee.

Summary

Issues:
Interpretation of Cenvat Credit Rule 4 (5) (a) of the Cenvat Credit Rules, 2004.

Analysis:

The case involved an application seeking waiver of the condition of pre-deposit of duty demand, interest, and penalty. The appellant, engaged in the manufacture of slide fasteners, had removed waste and scrap to a job worker without payment of duty under job work challans. The department contended that the appellant was required to pay duty on the removed scrap. The Jurisdictional Additional Commissioner confirmed the duty demand, interest, and penalty. The appellant's appeal was dismissed by the Commissioner (Appeals).

The appellant argued for waiver of pre-deposit, stating that the impugned order misinterpreted a previous Tribunal judgment. They contended that even if the department's logic was accepted, the exercise would be revenue neutral. The respondent did not dispute the interpretation of the previous Tribunal judgment but argued that the appellant's case fell under Rule 4 (5) (a) of the Cenvat Credit Rules, which did not apply to waste and scrap.

The Tribunal considered the contentions and held that the issue involved the interpretation of Cenvat Credit Rule 4 (5) (a) of the Cenvat Credit Rules, 2004. The Tribunal found that the appellant had a prima facie case for waiver of the pre-deposit condition. Consequently, the stay application was allowed, and the condition of pre-deposit of duty demands, interest, and penalty was waived until the disposal of the appeal.