2015 (10) TMI 143 - AT - Central Excise

Waiver of pre deposit - Availment of CENVAT Credit - Non maintenance of separate accounts - Held that - Commissioner, relying upon the verification report of the Divisional Officer reporting that E bikes kits for being assembled and the parts for being sold as spares, were being imported separately and as such they were not using common inputs for the manufacture of E-bikes and the spare parts, has held that the provisions of rule 11 (3) would be applicable in respect of E-bikes and on this basis the Commissioner has confirmed the cenvat credit demand of ₹ 10,35,147/- alongwith penalty of equivalent amount. Since the basic point of dispute in this case stands decided by the Commissioner which is based on the verification by the jurisdictional central excise officers reporting that the inputs for E-Bikes and the inputs to be sold as spare parts were being separately imported, we are of the view that this is not the case for total waiver of pre-deposit. The appellant are, therefore, directed to deposit an amount of 10% of the cenvat credit demand within a period of four weeks - Partial stay granted.

Summary

Issues Involved:
1. Whether the appellant is liable to reverse the credit under Rule 11(3) of Cenvat Credit Rules, 2004 for inputs in stock, finished products, and work in progress after E-bikes became fully exempt from duty.
2. Whether the appellant used common inputs for manufacturing E-bikes and spare parts, affecting the application of Rule 11(3) of Cenvat Credit Rules, 2004.
3. Whether the appellant should pre-deposit the cenvat credit demand, interest, and penalty to hear the appeal.

Issue 1:
The primary issue in this case revolves around the liability of the appellant to reverse the credit under Rule 11(3) of Cenvat Credit Rules, 2004 for inputs in stock, finished products, and work in progress after E-bikes became fully exempt from duty. The Department contended that the appellant failed to reverse the credit as required by the rule, leading to a demand of cenvat credit amounting to &8377; 4,89,693/-, along with interest and a penalty of &8377; 50,000/-. The Department argued that the appellant utilized the remaining credit even after the exemption to E-bikes for payment of duty on spare parts. The Commissioner upheld this view, resulting in a confirmation of the cenvat credit demand. The appellant, represented by counsel, challenged this decision, asserting that the common cenvat credit availed inputs were used for both dutiable and exempted final products. They contended that Rule 11(3) applies only when a manufacturer uses cenvat credit availed inputs to manufacture a dutiable final product that subsequently becomes fully exempt from duty. The appellant argued that since they manufactured more than one dutiable final product using the same inputs, the rule should not apply. The Tribunal, after considering the submissions, directed the appellant to deposit an amount of 10% of the cenvat credit demand within a specified period, with the balance being waived upon compliance.

Issue 2:
Another crucial issue in the case was whether the appellant used common inputs for manufacturing E-bikes and spare parts, impacting the application of Rule 11(3) of Cenvat Credit Rules, 2004. The Commissioner, based on a verification report indicating that E-bike kits and spare parts were imported separately, concluded that the inputs were not common for both products. This finding led to the application of Rule 11(3) and the confirmation of a cenvat credit demand of &8377; 10,35,147/-, along with an equivalent penalty. The appellant contested this decision, arguing that they had a strong prima facie case in their favor. The Tribunal, upon reviewing the Commissioner's order and the verification report, upheld the Commissioner's decision, stating that the inputs for E-bikes and spare parts were separately imported, thereby rejecting the appellant's claim of common inputs. Consequently, the Tribunal directed the appellant to deposit a specified amount of the cenvat credit demand within a stipulated period, with the balance being waived upon compliance.

Issue 3:
The final issue pertained to whether the appellant should pre-deposit the cenvat credit demand, interest, and penalty to proceed with the appeal. The Department argued that the appellant failed to establish a prima facie case in their favor, citing a previous order by the Commissioner and a stay order issued by the Tribunal, which required a pre-deposit of &8377; 20.00 Lakhs. The Tribunal, after considering both sides' submissions and perusing the records, determined that the case did not warrant a total waiver of pre-deposit. Consequently, the Tribunal directed the appellant to deposit a specified amount of the cenvat credit demand within a designated timeframe, with the requirement of pre-deposit for the balance amount, interest, and penalty being waived upon timely compliance.