2009 (4) TMI 729 - AT - Central Excise

Summary

Issues:
1. Application for waiver of pre-deposit and stay of recovery of irregularly availed Cenvat credit along with penalty under Cenvat Credit Rules, 2004.
2. Allegations of using common input furnace oil for manufacturing dutiable and exempted final products without maintaining separate accounts as per Rule 6(2) of CCR.
3. Requirement to pay 10% of the sale price of exempted final products, interest, and penalty for taking wrong credit.

Analysis:
1. The appellant, M/s. Burn Standard Co. Ltd. (BSC), sought waiver of pre-deposit and stay of recovery of Rs. 2,08,87,413/- irregularly availed Cenvat credit along with penalty imposed under Rule 15 of Cenvat Credit Rules, 2004. The Commissioner confirmed that BSC used common input furnace oil for manufacturing both dutiable and exempted final products without maintaining separate accounts, leading to the demand for the said amount.

2. The appellants argued that they had reversed the credit attributable to inputs used in manufacturing exempted final products up to a certain period and later took credit only on inputs for dutiable final products. The issue revolved around the failure to maintain separate accounts for furnace oil as required by Rule 6(2) of CCR. The Commissioner imposed the demand based on the lack of separate accounts from the receipt stage of furnace oil.

3. The appellants presented a certificate from a Chartered Engineer confirming the average consumption of furnace oil for production and the ability to determine the quantity used. They claimed to have maintained costing records and reversed or not availed credit for inputs used in exempted products. The Tribunal found a prima facie case against the demand and penalty due to the absence of denial regarding credit reversal. Considering the appellant's status as a central PSU incurring losses, the Tribunal ordered a complete waiver of pre-deposit and stay of recovery pending appeal decision.

This judgment highlights the importance of maintaining separate accounts for inputs used in manufacturing dutiable and exempted products to avoid demands and penalties under Cenvat Credit Rules. The Tribunal's decision to grant a waiver based on the appellant's evidence and circumstances underscores the need for proper documentation and compliance in availing Cenvat credit.