2007 (7) TMI 513 - AT - Central Excise

Summary

Issues:
The issues involved in the judgment are the applicability of Rule 6 of the Cenvat Credit Rules, 2002 regarding maintaining separate accounts for dutiable and exempted final products, and the option to pay 8% of the price of exempted goods without separate accounts.

Applicability of Rule 6 of Cenvat Credit Rules, 2002:
The appellants were engaged in manufacturing coated steel pipes and had contracts with the Chennai Metropolitan Water Supply and Sewerage Board. They cleared pipes to the Water Supply Board's contractors without duty payment, availing exemption under Notification No. 6/2002-C.E. Identical goods manufactured by the appellants were supplied to other customers on payment of duty. The issue arose regarding the application of Rule 6, which prohibits availing input duty credit for exempted final products without maintaining separate accounts. The appellants opted not to maintain separate accounts and paid 8% of the price of exempted goods under Rule 6(3)(b). The Commissioner held that separate accounts should have been maintained, and Rule 6(3)(b) was not applicable due to the absence of a sale in the supply to the Water Supply Project.

Option to Pay 8% of Price Without Separate Accounts:
In the appeal, the appellants argued that they had the option to maintain separate accounts or pay 8% of the price of exempted goods without separate accounts, citing support from a Tribunal decision. The Respondent contended that the cited decision was not applicable to the present case as the appellants were capable of maintaining separate accounts. The nature of transactions with the Water Supply Board's contractors was highlighted, emphasizing the absence of a sale in those transactions. The appellants argued that all elements of sale were present, making Rule 6(3)(b) applicable.

Judgment:
After considering the submissions, the Tribunal found the facts similar to a previous case and noted that the distinction sought by the Respondent did not exist. The Tribunal emphasized that Rule 6 provides two options: maintaining separate accounts or paying 8% of the price of exempted goods without separate accounts. It was clarified that the inability to maintain separate accounts was not a prerequisite for choosing the latter option. The Tribunal upheld the appellants' case, citing the previous decision and setting aside the impugned order, allowing the appeal.