2015 (3) TMI 253 - AT - Central Excise

Waiver of pre deposit - Inclusion of value of the free supplied item i.e. stack in the value of the final product - Held that - Admittedly stack are being supplied by the principal M/s. Leroy Somer India Pvt. Ltd. at Noida under the job work Challan issued under Rule 4(5) of the Cenvat Credit Rules. After fixing the stacks in the Bodies of the Industrial Alternators the goods are being returned to the principal who further uses the same in the manufacturer of their final product and the duty is being paid by the principal manufacturer on the full value. The provisions of Rule 4(5) of the Cenvat Credit Rules 2004 allows movement of the goods on job work basis under the job work Challan. As such at this prima facie stage we are of the view that the appellant has a good case in its favour so as to allow the stay petition unconditionally. - Stay granted.

Summary

Issues:
1. Whether fixing stacks to the Industrial Alternators amounts to manufacture.
2. Whether the duty imposed on the appellant is justified.
3. Whether the condition of pre-deposit of duty should be dispensed with.

Analysis:
1. The main issue in this case was whether fixing stacks to the Industrial Alternators amounts to manufacturing. The appellant, engaged in manufacturing Bodies of Industrial Alternators, also received stacks free of cost from their principals for fixing in the bodies. The Revenue contended that this activity constituted manufacturing and required adding the value of the free supplied stacks to the final product. However, the Tribunal noted that the stacks were supplied under job work provisions by the principal, and after fixing them, the goods were returned to the principal for further use in their final product. The Tribunal found that the movement of goods on a job work basis under Rule 4(5) of the Cenvat Credit Rules was permissible, indicating a favorable case for the appellant.

2. The second issue revolved around the justification of the duty imposed on the appellant by the Revenue. The Revenue had confirmed the duty raised on the final product cleared as 'stack with body' from the factory of the appellant. However, considering the provisions of Rule 4(5) of the Cenvat Credit Rules 2004 and the movement of goods under job work Challan, the Tribunal found that the appellant had a strong case in their favor. The duty was being paid by the principal manufacturer on the full value after further processing, indicating that the appellant's liability was not as straightforward as initially contended by the Revenue.

3. Lastly, the appellant sought the dispensation of the condition of pre-deposit of duty amounting to Rs. 1,14,68,382.00 inclusive of interest and penalty. The Tribunal, after considering the facts and the provisions of the Cenvat Credit Rules, found that the appellant had a prima facie good case in their favor. Consequently, the Tribunal decided to allow the stay petition unconditionally, indicating a favorable outcome for the appellant in terms of the pre-deposit condition. The order was pronounced in the open court, providing relief to the appellant in this aspect of the case.