2008 (4) TMI 562 - AT - Central Excise

Summary

Issues:
1. Application for waiver of pre-deposit and stay of recovery of amount along with penalty under Rule 173Q of Central Excise Rules, 1944.
2. Allegation of not maintaining separate accounts for inputs used in dutiable and exempted goods.
3. Interpretation of sub-rule (2) of Rule 57AD of Central Excise Rules, 1944.
4. Justification of demand for 8% of the sale price of exempted goods.
5. Validity of penalty imposition.

Analysis:

1. The appellant, a manufacturer of rough castings, applied for waiver of pre-deposit and stay of recovery of a specified amount along with a penalty under Rule 173Q of the Central Excise Rules, 1944. The Tribunal decided to dispense with the pre-deposit requirement and proceed with the appeal for final disposal after hearing both parties on the stay application.

2. The issue revolved around the appellant's alleged failure to maintain separate accounts of receipt, consumption, and inventory of common input scrap used in the production of exempted and dutiable goods. The lower authorities demanded 8% of the sale price of the exempted goods based on this discrepancy during a specific material period.

3. The appeal highlighted that although the appellant had maintained separate accounts, the lower authorities contended that the accounts were not in compliance with sub-rule (2) of Rule 57AD of the Central Excise Rules, 1944. The appellant had determined input consumption on a theoretical basis, which was deemed incorrect by the authorities. The Tribunal considered the specifics of the rule and the appellant's adherence to it.

4. Upon careful consideration, the Tribunal found that the appellant had indeed maintained separate accounts for dutiable and exempted goods, availed Modvat credit only for dutiable products, and accurately recorded scrap inventory for exempted goods. By following this procedure, the appellant fulfilled the requirements of sub-rule (2) of Rule 57AD. Consequently, the demand for 8% of the sale price of exempted goods was deemed unwarranted.

5. The Tribunal concluded that the impugned order demanding 8% of the sale price of exempted goods and imposing a penalty was unsustainable. Therefore, the order was set aside, and the appeal was allowed in favor of the appellant. The decision was dictated and pronounced in open court, bringing closure to the legal proceedings.