2009 (5) TMI 694 - Commission - Central Excise

Summary

Issues Involved:
1. Maintenance of separate records for dutiable and exempted goods.
2. Wrongful availment of Cenvat credit.
3. Calculation of duty liability.
4. Interest liability.
5. Eligibility for settlement.
6. Immunity from prosecution and penalty.

Issue-wise Detailed Analysis:

1. Maintenance of Separate Records:
The applicant-company did not maintain separate records for solvents in 2003-04 and for packing materials from 2003-04 onwards. This was in contravention of Rule 6(2) of the Cenvat Credit Rules, which mandates separate accounts for inputs used in dutiable and exempted goods. The Revenue argued that failure to maintain separate records necessitated payment of 8%/10% of the value of exempted goods as per Rule 6(3).

2. Wrongful Availment of Cenvat Credit:
Investigations revealed that the applicant-company availed Cenvat credit on inputs used in the manufacture of both dutiable and exempted goods. Specific discrepancies included altered invoice numbers and the use of common inputs without maintaining separate records. The applicant admitted to wrongful credit of Rs. 10,02,390/- on solvents and packing materials, with Rs. 6,91,196/- attributable to exempted goods removed for home consumption.

3. Calculation of Duty Liability:
The Revenue demanded Rs. 2,40,23,173/- based on 8%/10% of the value of exempted goods. The applicant argued that their records allowed for segregation of inputs used in dutiable and exempted goods, thus their liability should be Rs. 7,18,726/-. The Bench agreed with the applicant, citing the Pepsico case, and settled the duty liability at Rs. 7,18,726/-.

4. Interest Liability:
The applicant admitted liability to pay interest on the wrongly availed credit. The interest was calculated at 15% for the period from 1-4-2003 to 11-9-2003 and 13% thereafter, amounting to Rs. 4,31,450/-. The Bench ordered this amount to be appropriated from the Rs. 35 lakhs already deposited by the applicant.

5. Eligibility for Settlement:
The applicant met the requirements of Section 32E of the Central Excise Act, 1944, including registration with the Central Excise Department, a duty liability exceeding Rs. 3 lakhs, and proper maintenance of accounts. The settlement applications were allowed to proceed.

6. Immunity from Prosecution and Penalty:
The Bench imposed a penalty of Rs. 1,00,000/- on the applicant-company, considering they reversed the credit only after detection by the Revenue. Full immunity from penalty was granted to co-applicants 1 and 2. Immunity from prosecution under the Central Excise Act was also granted, subject to payment of the settled amounts.

Conclusion:
The Bench settled the duty liability at Rs. 7,18,726/-, interest at Rs. 4,31,450/-, and imposed a penalty of Rs. 1,00,000/-. The applicant and co-applicants were granted immunity from prosecution and additional penalties, provided all amounts were paid. The balance from the Rs. 35 lakhs deposited was ordered to be refunded or reversed in the Cenvat credit/PLA.