2004 (4) TMI 611 - AT - Central Excise

Summary

Issues involved:
1. Interpretation of Rule 57AD (2) of the Central Excise Rules, 1944 regarding maintaining separate accounts for dutiable and exempted products.
2. Applicability of CENVAT credit and liability under Rule 57AD (2) (b) of the Central Excise Rules, 1944.
3. Dispute over the requirement to pay an amount equal to 8% of the price of exempted goods.
4. Consideration of the Tribunal's decision in the case of Dharamsi Morarjee Chemical Co. Ltd. regarding the reversal of credit.

Analysis:
1. The case involved a dispute regarding the interpretation of Rule 57AD (2) of the Central Excise Rules, 1944, which mandates manufacturers to maintain separate accounts for dutiable and exempted products. The Revenue contended that the respondents failed to maintain separate accounts for inputs used in both types of products, leading to show cause notices for demanding an amount equal to 8% of the price of exempted goods.

2. The Revenue argued that as per Rule 57AD (2), manufacturers must maintain separate accounts for inputs used in dutiable and exempted products. Failure to do so could result in a demand for an amount equal to 8% of the price of exempted goods. However, the respondents had reversed the entire credit with interest, which, according to the Tribunal, absolved them of any liability under Rule 57AD (2) (b) of the Central Excise Rules, 1944.

3. The Tribunal considered the submissions from both sides and noted that the respondents had initially availed CENVAT credit on inputs used in both dutiable and exempted products. It was undisputed that the entire credit was subsequently deposited or reversed with interest. The Tribunal referenced a previous decision in the case of Dharamsi Morarjee Chemical Co. Ltd., which highlighted that once the credit was reversed, the manufacturer could not be deemed to have taken any credit of the duty. Therefore, the Tribunal rejected the Revenue's claim for an amount equal to 8% of the price of exempted goods.

4. In line with the decision in the case of Dharamsi Morarjee Chemical Co. Ltd., where the Tribunal emphasized that if the credit is reversed by the assessee, the provisions of Rule 57AD (2) do not apply. The Tribunal found that since the respondents had reversed the entire credit, the Revenue's demand for the amount equal to 8% of the price of exempted goods was not sustainable. Consequently, all appeals filed by the Revenue were rejected based on the precedent set by the aforementioned case.

This detailed analysis of the judgment provides a comprehensive understanding of the legal issues and the Tribunal's decision regarding the interpretation and application of Rule 57AD (2) of the Central Excise Rules, 1944 in the context of maintaining separate accounts for dutiable and exempted products.