2008 (6) TMI 458 - AT - Central Excise

Summary

Issues involved: Interpretation of Rule 6 of the Cenvat Credit Rules regarding maintenance of separate accounts for inputs used in dutiable and exempted products, determination of liability for recovery of amount, interest, and penalty.

Summary:
The case involved a dispute regarding the maintenance of separate accounts for inputs used in manufacturing dutiable and exempted printing paper products. The Commissioner held that the applicant failed to maintain verifiable separate accounts as required by Rule 6(2) of the Cenvat Credit Rules. Consequently, a recovery amount of Rs. 2,37,71,547 was imposed along with interest and a penalty of 60 lakhs on the applicant.

The applicant contended that they did maintain separate accounts and had not taken credit for inputs used in exempted products. They cited a previous order by the Commissioner and a relevant case law to support their argument. The Tribunal considered the submissions from both sides and observed that the purpose of Rule 6 was to prevent misuse of Cenvat credit by ensuring proper segregation of inputs. However, in this case, the accounts maintained were deemed unreliable and not directly linked to the actual use of inputs for exempted products.

After evaluating the facts and circumstances, the Tribunal directed the applicant to deposit Rs. 65 lakhs within 12 weeks and report compliance by a specified date. The remaining duty, interest, and penalty were waived pending the appeal process, considering the applicant's willingness to pay a portion of the disputed amount.