2008 (3) TMI 530 - AT - Central Excise

Summary

Issues involved: Interpretation of Rule 6(3)(b) of the CENVAT Credit Rules, 2004 regarding demand and penalty for non-maintenance of separate accounts for dutiable and exempted products using a common input.

Summary:
1. The judgment deals with an appeal against a demand of over Rs. 1.00 crore and a penalty of Rs. 20.00 lakhs u/s Rule 6(3)(b) of the CENVAT Credit Rules, 2004 for the period May 2006 to February 2007. The dispute arose from the use of hydrochloric acid as a common input in manufacturing dutiable gelatin and exempted phosphoryls. The appellants did not maintain separate accounts for these products, leading to the demand and penalty. The Tribunal examined the manufacturing process and the applicability of the rule in question to determine liability.

2. The appellants contended that the Tribunal erred in applying a previous decision regarding the use of hydrochloric acid as a common input. They argued that the larger Bench decision was inconsistent with the facts of their case, as hydrochloric acid might not be essential for manufacturing gelatin. They also claimed that the phosphoryls should be considered final products, not by-products. The Tribunal rejected these arguments, noting contradictions in the appellants' submissions and upheld the applicability of Rule 6(3)(b) based on the larger Bench decision.

3. Considering the submissions, the Tribunal found that the appellants' arguments lacked consistency. It emphasized that the larger Bench's decision in a similar case supported the application of Rule 6(3)(b) to the present situation due to the common use of hydrochloric acid. As the appellants failed to maintain separate accounts and did not demonstrate financial hardships, they were directed to predeposit Rs. 50,00,000/- within four weeks as a lenient measure towards the substantive demand. Compliance was required by a specified date.

Separate Judgement: No separate judgment was delivered by the judges in this case.