2007 (7) TMI 541 - AT - Central Excise

Summary

Issues involved:
Non-payment of 8% of the value of exempted goods; Imposition of penalty and interest on the amount paid; Challenge against penalty and interest imposition; Interpretation of Rule 57CC of the Central Excise Rules, 1944; Applicability of retrospective recovery provisions under the Finance Act, 2005.

Analysis:

Issue 1: Non-payment of 8% of the value of exempted goods
The case concerns the appellant's failure to pay 8% of the value of exempted goods cleared using duty paid inputs for manufacturing both dutiable and exempted goods under Rule 57CC of the Central Excise Rules, 1944. The appellant had paid the 8% amount as directed by Central Excise officers during a visit to their factory premises. Both the adjudicating authority and the first appellate authority imposed and upheld penalties and interest on the amount paid by the appellants.

Issue 2: Challenge against penalty and interest imposition
The appellants contested the imposition of penalty and interest, asserting that they were only challenging these aspects and not the 8% amount paid. The appellant's advocate referenced previous Tribunal decisions, specifically citing the cases of Merit Organics Ltd. and others v. CCEx & C, Vapi and Bharat Electronics Ltd. v. CCE, Bangalore-II, to support their argument against the penalty and interest imposition.

Issue 3: Interpretation of Rule 57CC and retrospective recovery provisions
Upon considering the submissions from both sides and reviewing the records, it was established that the appellant had availed credit on inputs without separate accounting for dutiable and exempted products, necessitating the payment of 8% of the value of exempted goods cleared. The retrospective recovery provisions introduced by clauses 82 and 83 of the Finance Act, 2005, were crucial in this case. The Division Bench's interpretation of these clauses, as seen in the case of Bharat Electronics Ltd., played a significant role in determining the outcome of the appeal.

Judgment:
The Tribunal found that the Division Bench's precedent directly applied to the current case, favoring the appellants. Consequently, the Tribunal upheld the confirmation of duty while setting aside the imposition of penalty and interest. The appeal was allowed in favor of the appellants based on the Division Bench's interpretation and explanation of the relevant provisions.