2009 (3) TMI 811 - AT - Central Excise

Summary

Issues:
1. Liability under Rule 6(3) of the Cenvat Credit Rules for availing credit on common inputs without maintaining separate accounts.
2. Classification of the by-product as "saw dust" and its exemption from duty.
3. Interpretation of the manufacturing process and definition of "saw dust."

Analysis:
1. The lower authorities demanded payment from the appellant under Rule 12 of the Cenvat Credit Rules, 2002, and Rule 14 of the Cenvat Credit Rules, 2004, along with penalties under Section 11AC of the Central Excise Act. The demand was based on the appellant availing Cenvat credit on common inputs without separate accounts for dutiable and exempted goods, as required by Rule 6(3) of the Cenvat Credit Rules. The manufacturing process involved the production of particle boards, with the generation of dust during trimming and sanding, which was sold without duty payment. The authorities alleged a breach of Rule 6 and imposed the demand, which was confirmed by the original authority and upheld by the Commissioner (Appeals).

2. The Exemption Notification and lower authorities' orders referred to the by-product as "saw dust," exempted from duty. However, upon examination, it was noted that the dust generated in the manufacturing process of particle boards did not qualify as "saw dust" as sawing was not part of the manufacturing process mentioned in the show-cause notice. This discrepancy raised questions regarding the correct classification and exemption status of the by-product.

3. The appellant presented evidence, including an English dictionary definition of "saw dust," to support their argument that the dust produced was not technically "saw dust" as it did not result from cutting wood with a saw. This interpretation challenged the notion that the by-product fell under the category of "saw dust." The Tribunal found a prima facie case in favor of the appellant, leading to a waiver of pre-deposit and a stay of recovery pending the final disposal of the appeal concerning the duty and penalty imposed.

In conclusion, the judgment addressed the issues of liability under Cenvat Credit Rules, the classification of the by-product, and the interpretation of the manufacturing process in determining the applicability of rules and exemptions. The Tribunal's decision favored the appellant based on the evidence and arguments presented, leading to a temporary relief from the imposed demands.