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2008 (9) TMI 806 - AT - Central Excise
Issues: Appeal against Order-in-Original regarding demand of 8% of sale value of exempted products due to non-maintenance of separate accounts for inputs used in dutiable and exempted products.
Analysis: 1. Background: The appeal was filed against Order-in-Original No. 13/2004-05 passed by the Commissioner of Central Excise & Customs, Visakhapatnam-I Commissionerate, Visakhapatnam. The appellant, a manufacturer of petroleum products, availed Cenvat credit on duty paid inputs and cleared products to another entity under bond without duty payment, which were later cleared to naval stores claiming exemption at nil rate of duty. 2. Contentions: The appellants argued that Rule 6 should not apply to them as they did not clear goods under nil rate of duty or exemption. They contended that since they had reversed the proportionate Cenvat credit on goods cleared to defense, demanding 8% of the sale value was unjustified. They relied on case laws to support their arguments. 3. Department's Stand: The department insisted on the strict application of the law, requiring the appellants to pay 8% of the sale value of the goods cleared to the defense unit. 4. Judgment: The Tribunal observed that the appellants had indeed reversed the credit attributable to goods cleared to another entity, which then cleared them to the defense unit. The Cenvat credit reversed was significantly lower than the 8% of the sale value demanded. Referring to the Chandrapur Magnet Wires Pvt Ltd. case, the Tribunal held that reversal of credit equated to not taking the credit at all. Consequently, the demand for 8% of the sale value was deemed unjustified. The impugned order was set aside, and the appeal was allowed with consequential relief. 5. Conclusion: The Tribunal's decision was based on the principle that once Cenvat credit is reversed, it is akin to not availing the credit at all. This ruling provided relief to the appellant against the demand for 8% of the sale value of exempted products due to the non-maintenance of separate accounts for inputs used in dutiable and exempted products.
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