2009 (3) TMI 848 - AT - Central Excise

Summary

Issues:
Appellant availed Cenvat credit on inputs for dutiable and exempted products without separate accounts as per Rule 6(3)(b) of Cenvat Credit Rules, 2002/2004. Dispute period: July 2004 to July 2005. Show cause notice issued demanding payment for exempted products, interest, and penalty.

Analysis:
The appeal was filed against Order-in-Original No. 6/2007-C. Ex dated 21-3-2007 by the Commissioner of Customs and Central Excise, Hyderabad-II Commissionerate, Hyderabad. The appellants availed Cenvat credit on inputs for both dutiable and exempted products without maintaining separate accounts, leading to a demand of Rs. 94,04,642/- for the disputed period. Interest under Section 11AB and penalty under Section 11AC read with Rules 13 and 15 of the Cenvat Credit Rules, 2002 were imposed. The appellants contested the order, leading to the present appeal.

When the matter was heard, reference was made to the decision of the Larger Bench in Nicholas Piramel (I) Ltd. v. CCE, Thane-I - 2008 (232) E.L.T. 37 (Tri.-LB), which held that no payment of 8% or 10% is required if the credit on inputs used in exempted goods is paid or reversed. Following this decision, it was found that the credit related to inputs used in the manufacture of exempted goods had already been reversed, aligning with the Larger Bench's view. Additionally, the High Court of Gujarat in CCE, Ahmedabad-I v. Maize Products - 2009 (234) E.L.T. 431 (Guj.) held that the payment of 8% of the price of final products was disproportionate to the credit availed. Consequently, the Tribunal directed the Original Authority to redetermine the credit availed on common inputs to be reversed by the assessee. No substantial question of law was found to arise in this context.

The issue in the present case mirrored the decisions of the High Court and the Larger Bench, leading to the conclusion that there was no merit in the impugned order. Therefore, the order was set aside, and the appeal was allowed with consequential relief. The operative portion of this Order was pronounced in open court at the conclusion of the hearing.