2015 (10) TMI 1168 - AT - Central Excise

Waiver of pre deposit - Penalty u/s 11AC - Valuation - Held that - appellant manufactured Electric Mosquito Destroyer Machine (EMD) and stock transferred to their principal supplier M/s. Godrej on payment of duty by taking job charges as cost of production 110%. Whereas the differential duty demanded in terms of Rule 10(A) of Valuation Rules. We find that these goods stock transferred are meant for export and the 2nd applicant on receipt of the goods from the applicant after carrying out quality testing and other activities, exported the same on payment of duty at higher value which is not in dispute. The second applicant also claimed rebate on excise duty paid on the goods exported. On identical case against the second applicant ie M/s. Godrej Consumer Products Ltd. the department disallowed the cenvat credit, of duty paid on the finished goods cleared by the first applicant and the appeal filed before this Tribunal Vide miscellaneous Order 2014 (10) TMI 238 - CESTAT CHENNAI , this Tribunal granted full waiver of pre-deposit. Considering the above decision and also considering the fact that even if the applicant pays the differential duty, the 2 nd applicant is entitled to the Cenvat credit the applicant has made out a prima facie case for full waiver - Stay granted.

Issues: Waiver of pre-deposit of duty, imposition of equivalent penalty under Section 11AC, valuation of goods for excise duty, job work scenario, revenue neutrality, cenvat credit denial.

Analysis:

The judgment dealt with two applications for waiver of pre-deposit of duty and imposition of penalties arising from a common adjudication order. The applicants, acting as job workers, manufactured 'Electric Mosquito Destroyer Machine (EMD)' for a principal manufacturer and cleared the goods both for domestic market sale and export. The Revenue determined the value of goods based on the price at which the principal manufacturer had paid duty, resulting in a demand for differential duty and imposition of penalties on the applicants. The Commissioner (Appeals) upheld the order. The applicants contended that they had correctly paid excise duty for domestic sales under Section 4A and for stock transfers to the principal manufacturer for export. They argued that the department had erroneously enhanced the value based on the duty paid by the principal manufacturer, despite the goods being meant for export and duty being duly paid. The applicants sought waiver of pre-deposit, citing revenue neutrality and a previous Tribunal decision in a similar case.

The Revenue, on the other hand, maintained that no further manufacturing occurred at the applicants' premises, and the value was correctly determined under Rule 10A by considering the duty paid by the principal manufacturer. It was argued that as job workers, the price at which the principal manufacturer cleared the final product was the relevant value. The department had also denied modvat credit to the principal manufacturer, claiming that their activity did not amount to manufacturing. The Tribunal, after hearing both sides, observed that the goods stock transferred were indeed for export, and the principal manufacturer had exported the goods after quality testing and other activities, paying duty at a higher value. The Tribunal noted a previous case where full waiver of pre-deposit was granted to the principal manufacturer in a similar situation. Considering this precedent and the fact that the principal manufacturer would still be entitled to cenvat credit even if the applicants paid the differential duty, the Tribunal granted a full waiver of pre-deposit of duty and penalty for both applicants, staying the recovery until the appeals were disposed of.

In conclusion, the Tribunal allowed the stay applications, emphasizing the entitlement of the principal manufacturer to cenvat credit and the prima facie case made by the applicants for a full waiver of pre-deposit. The judgment underscored the importance of considering revenue neutrality and past decisions in similar cases when determining the waiver of pre-deposit and penalties in excise duty matters involving job work scenarios and valuation disputes.

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