2010 (11) TMI 915 - AT - Central Excise

CENVAT credit - manufacture of dutiable and exempted goods - non-maintenance of separate records - Rule 6(3)(b) of the Cenvat Credit Rules 2002

Summary

Issues:
1. Reversal of 8% amount under Rule 6(3)(b) of Cenvat Credit Rules, 2002.
2. Liability under Section 11D for amount collected from customers.
3. Deduction of 8% from transaction value as central excise duty.
4. Confirmation of demand of duty and interest.
5. Imposition of penalty and its justification.

Analysis:
1. The appellant, engaged in manufacturing M.S. Pipes under exemption Notification No. 47/2002-C.E., reversed 8% of the price of goods due to the absence of separate records for inputs used in dutiable and exempted products. The issue arose when the appellant deducted 8% from the transaction value, treating it as central excise duty.

2. The first issue involved the liability under Section 11D for the 8% amount collected from customers. The Commissioner (Appeals) dropped this charge based on the Tribunal's decision in Unison Metals Ltd. case. The Tribunal clarified that the 8% payment was not a tax but an adjustment of credit for inputs used in exempted products.

3. The second issue related to the deduction of 8% from the transaction value. The lower authorities confirmed a shortfall of Rs. 61,624 as the appellant treated the 8% deduction as central excise duty. The Tribunal cited the Mahindra & Mahindra Ltd. case, emphasizing that the 8% payment was not a duty but a credit adjustment, disallowing the deduction.

4. The Tribunal confirmed the demand of duty and interest, stating that the 8% amount cannot be considered as duty to deduct from the transaction value. The decision in the Mahindra & Mahindra Ltd. case was deemed applicable to the current scenario, leading to the confirmation of duty demand and interest.

5. Regarding the penalty of Rs. 61,624, the Tribunal noted that the appellant openly deducted 8% from the price on invoices, and there was no intention to conceal this fact. Considering this, the penalty was set aside based on a bona fide belief in the availability of the deduction. The appeal was disposed of accordingly, with the penalty being revoked.