2011 (12) TMI 498 - AT - Central Excise

Summary

Issues involved:
Demand confirmation against appellant for using duty paid inputs, maintaining separate accounts for dutiable and exempted final products, applicability of Rule 6(2) and 6(3) of Cenvat Credit Rules, 2004, imposition of penalty and interest, interpretation of Bagasse as an excisable product, stay application.

Analysis:

1. Demand Confirmation and Separate Accounts Requirement:
The case involved the confirmation of a demand of &8377; 1,98,403 against the appellant for using duty paid inputs in manufacturing sugar without maintaining separate accounts for dutiable and exempted final products as required by Rule 6(2) of Cenvat Credit Rules, 2004. The Assistant Commissioner imposed a penalty and interest based on this non-compliance, which was upheld by the Commissioner (Appeals).

2. Interpretation of Bagasse as an Excisable Product:
The appellant argued that Bagasse, an inevitable waste product in sugar manufacturing, should not be considered an excisable product. They cited judgments from the Hon'ble Allahabad High Court and the Apex Court to support their claim. They contended that Bagasse cannot be treated as a final product, and therefore, the provisions of Rule 6(2) and 6(3) should not be applicable to it.

3. Applicability of Rule 6(2) and 6(3) of Cenvat Credit Rules:
The Tribunal's judgment in a similar case was referenced to argue that Bagasse, though mentioned in the Tariff, should not be treated as a final product subject to excise duty. The appellant highlighted the impossibility of maintaining separate accounts for inputs when an inevitable waste or by-product like Bagasse is generated during the manufacturing process. The principle of lex non cogit ad impossibilia was invoked, emphasizing that the law does not expect fulfillment of obligations that are impossible to meet.

4. Stay Application and Waiver of Pre-Deposit:
After considering the arguments from both sides and examining the records, the Member (T) granted the stay application. It was observed that the appellant had a strong prima facie case, and the impugned order was deemed incorrect. Consequently, the requirement of pre-deposit for Cenvat credit demand, interest, and penalty was waived for the appeal hearing, and recovery was stayed until the appeal's disposal.

In conclusion, the judgment addressed the issues of demand confirmation, interpretation of Bagasse, applicability of Cenvat Credit Rules, and the stay application, ultimately ruling in favor of the appellant by allowing the stay and waiving the pre-deposit requirements.