2015 (5) TMI 699 - AT - Central Excise

Waiver of pre deposit - Denial of CENVAT Credit - Inputs used for job work - Held that - When there is no physical removal of the cenvated inputs, there is no requirement to reverse the credit under Rule 3(5) of the Cenvat Credit Rules, the appellant have strong prima facie case in their favour. In view of this, amount of ₹ 2.01 crores already paid by the appellant is, in our view, sufficient for hearing of their appeal. As regards Shri Pawan Batra, DGM is concerned, we are of the prima facie view that in the circumstances of this case, there does not appeal to be any justification for imposition of penalty on him under Rule 26 of the Central Excise Rules, 2002. Hence, the requirement of pre-deposit of penalty by Shri Pawan Batra, DGM for hearing of their appeal is waived. Credit had been taken by Bhiwadi Unit on the basis of the supplementary invoices issued by the Chopanki Unit while non-reversal of this credit by the Chopanki Unit was deliberate - Held that - Following decision of Karnataka Soaps & Detergents Ltd. - 2005 (6) TMI 182 - CESTAT, BANGALORE it is held that Rule 9(1)(b) is not-applicable in case of inter-unit transfer, the appellant have a prima facie case in their favour and as such, the requirement of pre-deposit of cenvat credit demand, interest and penalty is waived for hearing of their appeal and recovery thereof is stayed. Credit has been taken by the Bhiwadi Unit on the basis of the certain invoices regarding use of the cenvated inputs by Chopanki unit in the job work for Bhiwandi unit which the Chopanki Unit was not required to pay any amount under Rule 3(5) - Held that - Following decision of MDS Switchgears Ltd. 2008 (8) TMI 37 - SUPREME COURT - Stay granted.

Summary

Issues:
1. Cenvat credit demand against Chopanki Unit for job work.
2. Denial of cenvat credit to Bhiwadi Unit under Rule 9(1)(b) of Cenvat Credit Rules.
3. Cenvat credit demand against Bhiwadi Unit for use of synthetic rubber.
4. Orders passed by the Commissioner Central Excise, Jaipur.

Analysis:

Issue 1: Cenvat credit demand against Chopanki Unit for job work
The appellant company had two units for tyre manufacturing, with one unit lacking the facility for preparing compounded rubber. Inputs were sent from one unit to another for job work, and invoices were raised accordingly. The demand of cenvat credit against the Chopanki Unit was contested, citing previous Tribunal judgments that no reversal of credit is required when inputs are used for job work without physical removal. The Tribunal agreed, waiving the pre-deposit requirement for the appeal and staying recovery.

Issue 2: Denial of cenvat credit to Bhiwadi Unit under Rule 9(1)(b)
The Bhiwadi Unit faced denial of cenvat credit under Rule 9(1)(b) for alleged deliberate non-reversal by the Chopanki Unit. The appellant argued against this, referencing a Karnataka High Court judgment that Rule 9(1)(b) does not apply in cases of stock transfer without sale. The Tribunal found in favor of the appellant, waiving the pre-deposit requirement and staying recovery for the appeal.

Issue 3: Cenvat credit demand against Bhiwadi Unit for use of synthetic rubber
A cenvat credit demand was made against the Bhiwadi Unit for the use of synthetic rubber in job work, where duty-free rubber was also utilized. The appellant contended that no duty was required to be paid for such usage under Rule 3(5). Citing a Supreme Court judgment, the Tribunal agreed with the appellant's interpretation, waiving the pre-deposit requirement and staying recovery for the appeal.

Issue 4: Orders passed by the Commissioner Central Excise, Jaipur
The Commissioner passed orders confirming cenvat credit demands and imposing penalties on the units. However, the Tribunal, after considering submissions from both sides and perusing the records, found in favor of the appellants on various grounds, including the applicability of previous judgments and legal interpretations. The Tribunal waived pre-deposit requirements and stayed recovery for the appeals filed by the appellant company and its units.

This detailed analysis summarizes the legal judgment comprehensively, addressing each issue involved in the case while preserving the legal terminology and significant details from the original text.