2012 (11) TMI 560 - AT - Central Excise

Waiver of pre-deposit alleged that capital goods were used in the manufacture of non-excisable goods i.e. fractionated pure/impure spirit, which has been further used for manufacture of rectified spirit and as such, they were not entitled to credit on duty paid of said capital goods Held that - If the manufacturing processes involved a number of stages and exempted dutiable products came into existence, it cannot be said that capital goods were used in the manufacture of only exempted goods. The entire process is to be taken into consideration and not only the final stage, which may involve only mixing of two products - capital goods cannot held to be exclusively used in the manufacture of exempted intermediate product so as to deny the benefit of modvat credit - pre-deposit waived

Summary

Issues:
Prayer to dispense with the condition of pre-deposit of duty and penalty.

Analysis:
The appellant, engaged in the manufacture of denatured spirit/industrial alcohol, availed Cenvat credit on duty paid on capital goods. The Revenue contended that the capital goods were used in the manufacture of non-excisable goods, thus not entitled to credit. The Revenue initiated proceedings against the appellant for denial of modvat credit, alleging that the capital goods were used for non-excisable products. Show cause notices were issued proposing demand confirmation and penalty imposition.

During adjudication, the appellant argued that the capital goods were used in the manufacture of the final product, denatured spirit, which required the entire manufacturing process to be considered. They emphasized that denatured spirit was an intermediate product, and the presence of an exempted intermediate product should not be a ground for credit denial. The adjudicating authority, however, confirmed the demand and penalty.

The Tribunal disagreed with the Revenue's contention, stating that if multiple stages were involved in the manufacturing process and exempted dutiable products were produced, it could not be concluded that capital goods were used solely for exempted goods. The Tribunal agreed with the appellant that considering the entire process was necessary, not just the final stage. The Tribunal referenced a Supreme Court judgment supporting this view.

Consequently, the Tribunal dispensed with the pre-deposit condition of duty and penalty, allowing the stay petition unconditionally.