2010 (5) TMI 743 - AT - Central Excise

Summary

Issues Involved:
The issue involves the liability of a manufacturer to pay an amount equal to 8% of the clearance value of waste generated during the manufacture of biscuits, due to the lack of separate account and inventory maintenance of cenvatable inputs for dutiable and exempted finished products.

Comprehensive Details of the Judgment:

Manufacture of Biscuits and Waste Generation:
The respondents are engaged in the manufacture of Biscuits chargeable to Central Excise duty under sub-heading 1905.11 of the Central Excise Tariff. They manufacture biscuits on a job work basis for another company, utilizing raw materials supplied by them. Waste in the form of floor sweeping, including flour and dirty dough, is generated during the manufacturing process and returned to the supplying company without payment of duty.

Department's View and Show Cause Notice:
The Department contended that the waste generated, being an exempt product, necessitated the payment of an amount equal to 8% of the clearance value of such waste due to the lack of separate account maintenance for cenvatable inputs used in dutiable and exempted finished products. A show cause notice was issued demanding Rs. 81,000 for the period from 1999-2000 to 2002-03.

Orders and Appeals:
The Assistant Commissioner confirmed the demand and imposed a penalty, which was later set aside by the Commissioner (Appeals) on the grounds that the waste generated was non-excisable and not covered by the definition of "exempted goods." The Revenue appealed against this decision.

Arguments and Tribunal's Decision:
The Department argued that the waste should be considered as exempted goods due to being residue/waste from food industries. However, the respondent contended that the waste was non-excisable based on previous Tribunal judgments. The Tribunal upheld the Commissioner (Appeals) decision, stating that the waste was non-excisable and not covered by the definition of "exempted goods."

Applicability of Cenvat Credit Rules:
The Tribunal further explained that even if the waste was considered nil-rated excisable goods, the provisions of Rule 6(2) and 6(3) of the Cenvat Credit Rules would not apply in this case. It was emphasized that compliance with impossible duties must be excused, as supported by previous Tribunal and High Court judgments.

Final Decision:
In conclusion, the Tribunal found no infirmity in the impugned order, dismissing the Revenue's appeal.

*(Pronounced in open court on 3-5-2010)*