2008 (9) TMI 698 - AT - Central Excise

Summary

Issues Involved:
1. Classification of products and applicability of exemptions.
2. Requirement to maintain separate accounts for inputs and input services.
3. Applicability of Rule 6(6) of the Cenvat Credit Rules, 2004 for exported goods.
4. Entitlement to Cenvat credit and refund under Rule 5 of the Cenvat Credit Rules, 2004.
5. Waiver of pre-deposit of demanded amounts.

Summary:

1. Classification of Products and Applicability of Exemptions:
The Commissioner held that the process of packing different medicines in blister packs does not amount to manufacture and confirmed a demand of Rs. 1,65,45,396/- u/s Rule 6(3)(b) of the Cenvat Credit Rules, 2004, along with interest and an equivalent penalty. The applicants classified their products under various sub-headings of Chapter 30 of the Central Excise Tariff Act, 1985, and claimed exemptions under Notification No. 4/2006 dated 1-3-2006. The Commissioner reclassified these products and held them exempted under different sub-headings.

2. Requirement to Maintain Separate Accounts for Inputs and Input Services:
The Commissioner noted that the applicants did not maintain separate accounts for inputs and input services as required u/s Rule 6(2) of the Cenvat Credit Rules, 2004, and thus were required to pay an amount equal to 10% u/s Rule 6(3) of the Cenvat Credit Rules, 2004.

3. Applicability of Rule 6(6) of the Cenvat Credit Rules, 2004 for Exported Goods:
The applicants contended that the goods classified as exempted were cleared either for export or under Notification No. 108 of 1995. The Commissioner held that Rule 6(6)(v) was not applicable as the goods were exported under claim of rebate and not under bond. However, the Tribunal noted that the applicants paid duty at the time of removal, which was more than the amount equal to 10% of the value of the goods, making the further payment of 10% unnecessary.

4. Entitlement to Cenvat Credit and Refund under Rule 5 of the Cenvat Credit Rules, 2004:
The Tribunal observed that the applicants were prima facie entitled to credit for inputs used in exempted goods cleared for export and could claim a refund under Rule 5 of the Cenvat Credit Rules, 2004. This was supported by the Tribunal's decision in Punjab Stainless Steel Industries and the judgment of the Hon'ble Bombay High Court in the case of M/s. Repro India Ltd.

5. Waiver of Pre-deposit of Demanded Amounts:
The Tribunal concluded that the applicants had made a strong case for the complete waiver of the pre-deposit of the demanded amounts. Consequently, the pre-deposit of the amounts demanded was dispensed with, and recovery was stayed pending the disposal of the appeal.

Conclusion:
The Tribunal found that the applicants were not required to pay an amount equal to 10% u/s Rule 6(3)(b) of the Cenvat Credit Rules, 2004, and were entitled to credit for duty paid on inputs used in goods classified as exempted but exported. The pre-deposit of the demanded amounts was waived, and recovery was stayed pending the appeal's outcome.