2008 (7) TMI 803 - AT - Central Excise

Summary

Issues:
Whether the appellants are required to pay 10% of the value of exempted products due to failure to maintain separate accounts as required under Rule 6(2) of Cenvat Credit Rules, 2004.

Analysis:
The appellants filed a stay petition against the order confirming a demand of Rs.5,36,84,960/- and a penalty of Rs. 54 lakhs for not maintaining separate accounts for exempted products. The main issue was whether they needed to pay 10% of the value of exempted products due to the lack of separate accounts for common inputs like plastic granules and fuel oil. The appellant argued that they had sufficient records to prove the quantity of inputs for dutiable and exempted goods, debiting the credit taken for common inputs going into exempted products. They maintained separate records for plastic granules and furnace oil, ensuring credit reversal for inputs going into exempted products. The Revenue contended that maintaining separate accounts for inputs going into exempted and dutiable products is mandatory under Rule 6(2) of Cenvat Credit Rules, emphasizing the lack of separate storage and accounting for furnace oil and plastic granules.

The Tribunal considered both sides' submissions and found that the appellants did not take credit for inputs going into exempted products, demonstrating substantial compliance with Rule 6(2) of Cenvat Credit Rules. They noted that the appellants had reversed credit in advance for inputs used in exempted products, even without a specific procedure prescribed by the Board. The Tribunal emphasized that as long as credit is not taken for inputs used in exempted products, the method chosen by the assessee is acceptable. They concluded that the appellants had a strong case, allowing the stay petition unconditionally. The decision highlighted the importance of ensuring credit is not taken for inputs used in exempted products, acknowledging the appellants' efforts to comply with the rules despite the absence of a prescribed procedure by the Board.