2014 (4) TMI 502 - AT - Central Excise

Whether the main applicant, a textile processor was eligible for the Compounded Levy Scheme (CLS) as notified under Notification No.16/2000-CE, dated 30.04.2000, which came into effect from 01.05.2000 - Held that - there is a strong prima facie case in favour of the applicant for the period after 01.11.2001 since from that date the applicant-assessee was not having any open-air stentor. However, for the period prior to 31-10-2001 the matter is arguable. We rely on the Explanation II of Rule 96ZNA, which is reproduced in para 2 of this order and prima facie, we are of the view that for the period 01.05.2001 to 31.10.2001, the applicant was hit by Explanation II - there is also a very strong case in the pleading for extending deemed CENVAT credit for the period for which CLS is being denied. - Conditional stay granted.

Issues involved:
1. Eligibility of the main applicant for the Compounded Levy Scheme (CLS) under Notification No.16/2000-CE.
2. Interpretation of Rules 96ZNA and 96ZNB regarding the applicant's eligibility for CLS.
3. Dispute over the total value of plant and machinery installed in the factory for availing CLS benefits.
4. Denial of 'deemed credit' on inputs by the adjudicating authority.
5. Imposition of penalty on the applicants.
6. Consideration of spares and accessories as part of installed plant and machinery for CLS eligibility.

Analysis:
1. The primary issue in this case revolved around the eligibility of the main applicant, a textile processor, for the Compounded Levy Scheme (CLS) under Notification No.16/2000-CE. The dispute centered on whether the applicant qualified for CLS as per the provisions of Rules 96ZNA and 96ZNB. The Revenue contended that the applicant was ineligible due to the presence of an open-air stentor for drying clothes, as per Explanation II of Rule 96ZNA.

2. The second issue concerned the interpretation of Rules 96ZNA and 96ZNB regarding the applicant's eligibility for CLS. The Revenue argued that the total value of plant and machinery in the factory exceeded the prescribed limit of Rs.3 crores, thus disqualifying the applicant from availing CLS benefits. Additionally, the dispute extended to the treatment of spares and accessories in the calculation of plant and machinery value.

3. The adjudicating authority demanded excise duty from the applicant as per normal provisions, leading to a substantial differential duty demand. The applicant contended that they dismantled the open-air stentor upon being informed of their ineligibility for CLS, thereby asserting their compliance with the requirements.

4. The denial of 'deemed credit' on inputs by the adjudicating authority was another contentious issue raised by the applicant. They argued that if deemed credit was allowed, the demand on the assessee would significantly reduce, emphasizing the need for a fair consideration of this aspect.

5. The imposition of a penalty on the applicants was challenged on the grounds that all relevant facts were disclosed in the application for CLS, and the delay in passing orders regarding eligibility was attributed to the department's inefficiency.

6. The consideration of spares and accessories as part of installed plant and machinery for determining CLS eligibility was a point of contention. The applicant argued that such components should not be included in the valuation, while the Revenue maintained that they should be accounted for based on their reflection in the balance sheet.

In conclusion, the Tribunal found a strong prima facie case in favor of the applicant post-November 2001, when the open-air stentor was removed. However, for the period prior to that, the matter was deemed arguable. The Tribunal ruled in favor of the applicant regarding the treatment of spares and accessories and ordered a pre-deposit of Rs.35 lakhs, with the balance dues waived subject to compliance.

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