2008 (2) TMI 735 - AT - Central Excise

CENVAT credit - common inputs on which credit has been availed are used in the manufacture of dutiable and exempted goods - Rule 6 of CCR - Demand - Time Limitation - Held that - the demand is for the period August 2001 to January 2002 and show-cause notice was issued on 12-7-04 alleging suppression with intent to evade payment of duty. The appellants were regularly filed ER-I monthly returns showing clearance of goods on payment of duty and clearance of the same goods under notification without payment of duty - the allegation of suppression on the part of appellant to evade payment of duty is not sustainable hence demand is set aside as time-bar - penalty also set aside - appeal allowed.

Summary

Issues:
1. Demand confirmation and penalty imposition under Cenvat Scheme for exempted goods.
2. Challenge on merits and time-bar regarding show-cause notice issuance.
3. Interpretation of common inputs under Cenvat Credit Rules.
4. Applicability of Tribunal decision in a similar case.
5. Allegation of suppression to evade payment of duty.
6. Maintenance of separate records for common inputs.

Analysis:
The appellant, engaged in manufacturing steel tor bars, appealed against an order confirming demand and imposing penalties under the Cenvat Scheme for clearing goods exempted from duty under a specific notification related to earthquake-affected areas in Gujarat. The demand was based on the usage of common inputs for manufacturing both dutiable and exempted goods. The adjudicating authority upheld the demand and penalty, which was subsequently rejected by the Commissioner (Appeals).

Regarding the challenge on merits and time-bar, the appellant contended that the demand period was from August 2001 to January 2002, while the show-cause notice alleging suppression to evade duty was issued on 12-7-2004. The appellant argued that they regularly filed returns indicating clearances with and without duty payment, along with maintaining relevant statutory records for credit availed on inputs. The Tribunal found the suppression allegation unsustainable due to the appellant's consistent compliance, setting aside the demand as time-bar and consequent penalty.

In terms of interpreting common inputs under the Cenvat Credit Rules, the Revenue relied on a Tribunal decision in a similar case to support their position against the appellant. However, the Tribunal found in favor of the appellant based on the specific circumstances and evidence presented, leading to the demand being set aside and the appeal allowed.

The issue of maintaining separate records for common inputs was raised, with the Revenue arguing that the appellant failed to inform them about not maintaining such records. Despite this contention, the Tribunal's decision primarily focused on the lack of sustainable evidence supporting the suppression allegation, ultimately resulting in the demand cancellation and penalty waiver.

In conclusion, the Tribunal's judgment favored the appellant by dismissing the demand and penalty imposition due to the lack of substantial evidence supporting the suppression allegation and the timely challenge raised regarding the show-cause notice issuance. The decision emphasized the importance of consistent compliance and proper documentation in such cases, ultimately leading to a favorable outcome for the appellant in this legal matter.