2012 (4) TMI 560 - AT - Central Excise

Summary

Issues Involved:
1. Applicability of Rule 57CC of the Central Excise Rules, 1944.
2. Demand for reversal of Cenvat credit.
3. Retrospective amendment by Section 69(2) of Finance Act, 2010.
4. Requirement of pre-deposit for hearing the appeal.

Summary:

1. Applicability of Rule 57CC of the Central Excise Rules, 1944:
The appellant processes raw vegetable oil into vanaspati ghee and refined vegetable oil, which are exempt from duty, while by-products like soap stock/acid oil are dutiable. The department issued a show cause notice demanding an amount equal to 8% of the sale value of exempted goods due to non-maintenance of separate inventory for inputs used in dutiable and exempted products. The Commissioner initially ordered recovery of Rs. 4,51,574/- representing proportionate Cenvat credit but dropped the remaining demand under Rule 57CC. This order was upheld by the Tribunal but later remanded by the Punjab & Haryana High Court for de novo adjudication in light of the Supreme Court's judgment in Gujarat Narmada Fertilizers Co. Ltd.

2. Demand for reversal of Cenvat credit:
In the de novo adjudication, the Commissioner confirmed the demand of Rs. 12,25,95,962/- along with interest and imposed an equal amount of penalty, invoking the extended period u/s 11A(1) of the Central Excise Act, 1944. The appellant argued that the actual amount of Cenvat credit attributable to the exempted products was Rs. 4,51,574/-, which had already been reversed, and that Rule 57CC should not apply as it is impossible to maintain separate accounts for inputs used in both dutiable and exempted products.

3. Retrospective amendment by Section 69(2) of Finance Act, 2010:
The appellant contended that even if Rule 57CC applied, the retrospective amendment introducing Rule 57CCC allowed for the reversal of proportionate credit instead of 8% of the sale value of exempted goods. The appellant cited the Gujarat High Court's judgment in Shree Rama Multi Tech Ltd., which supported their contention that the benefit of the amendment should be granted even if procedural requirements were not followed.

4. Requirement of pre-deposit for hearing the appeal:
The Tribunal found that the appellant had a prima facie case and that the principle "Lex Non Cogit ad impossibilia" (law does not compel a person to do that which is impossible) applied. Consequently, the requirement of pre-deposit of the balance amount of demand, interest, and penalty was waived, and recovery was stayed until the disposal of the appeal.

Conclusion:
The Tribunal concluded that the appellant's reversal of Rs. 4,51,574/- was sufficient, and the demand for 8% of the sale value of exempted goods was not justified. The retrospective amendment by Section 69(2) of the Finance Act, 2010, further supported the appellant's case, leading to the waiver of pre-deposit requirements for the pending appeal.