2009 (2) TMI 669 - AT - Central Excise

Summary

Issues:
Manufacture of branded and un-branded refined oil under Chapter 15071000, credit reversal for common inputs, demand under Rule 12 of Central Excise Rules, 2002, penalty imposition, maintenance of separate accounts for inputs, applicability of previous tribunal decisions, interpretation of exemption notification.

Analysis:
The case involved the manufacturing of branded and un-branded refined oil falling under Chapter 15071000. The applicant used common inputs like packing materials and chemicals in the production of both dutiable branded and exempted un-branded refined oil. The dispute arose regarding the credit involved in the common inputs for clearances made between 1-3-2003 to 29-4-2003, amounting to Rs. 7,52,963/-, which was later reversed after a show cause notice. The Commissioner confirmed a demand of Rs. 1,42,71,958/- under Rule 12 of the Central Excise Rules, 2002, and imposed an equal penalty.

The applicant argued that they maintained separate accounts for chemicals, contrary to the Department's claim. They contended that the demand was highly disproportionate compared to the credit taken and cited previous tribunal decisions where offers to reverse a small amount of credit were accepted, leading to the setting aside of substantial demands. The Department, however, insisted that without separate accounts for inputs going into exempted products, the applicant was liable to pay a percentage of the value of the exempted products.

After considering both sides' submissions, the Tribunal noted the discrepancy between the credit amount and the demand imposed. They acknowledged the claim of maintaining separate accounts for chemicals, which needed further examination during the final hearing. The Tribunal referenced previous cases where relief was granted in similar circumstances and distinguished a High Court decision regarding the interpretation of an exemption notification, stating its inapplicability to the current case.

Consequently, the Tribunal found a prima facie case in favor of the applicant and decided to waive the pre-deposit of dues as per the impugned order, staying the recovery until the appeal's disposal.