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2007 (4) TMI 84 - AT - Central ExciseCenvat/Modvat - Alleged that appellant used common inputs i.e plastic crates, FO used in the exempted and dutiable final products but didn t maintain separate accounts for it and accordingly demand were made alongwith interest and penalty - Held that (i)In plastic crates demand not sustainable, (ii)In case FO demand sustained
Issues Involved:
1. Whether used plastic crates are considered 'inputs' under the Cenvat Credit Rules, 2002. 2. Whether the appellants maintained separate accounts for inputs used in the manufacture of dutiable and exempted goods. 3. Applicability of Rule 6(3)(b) of the Cenvat Credit Rules, 2002. 4. Applicability of Rule 6(2) of the Cenvat Credit Rules, 2004 for common inputs like Furnace Oil (FO). 5. Whether the reversal of Cenvat credit on common inputs negates the requirement to pay 8%/10% of the sale price of exempted goods. Detailed Analysis: 1. Whether used plastic crates are considered 'inputs' under the Cenvat Credit Rules, 2002: The appellants argued that used plastic crates should not be considered as 'inputs' under the Cenvat Credit Rules, 2002, once they have been used for packing final products. The Commissioner, however, held that plastic crates continued to be inputs till they were damaged/destroyed and had become unserviceable. The Tribunal found considerable force in the appellants' argument that used plastic crates are not subject to the rules regulating the use of common inputs. The Tribunal concluded that used crates are not 'inputs' for the purpose of Rule 6 of CCR, 2002, and thus, the demand made on the appellants was incorrect. 2. Whether the appellants maintained separate accounts for inputs used in the manufacture of dutiable and exempted goods: The appellants maintained separate accounts for new plastic crates used in the manufacture of dutiable and exempted goods. The Commissioner did not deny this claim but held that the repeated use of old crates without maintaining separate accounts was not in compliance with Rule 6(2) of CCR, 2002. The Tribunal found that the appellants had complied with the requirement of maintaining accounts for new crates and that non-maintenance of accounts for used crates did not attract the liability under Rule 6. 3. Applicability of Rule 6(3)(b) of the Cenvat Credit Rules, 2002: The Commissioner demanded an amount equivalent to 8% of the sale price of 'Slice' under Rule 6(3)(b) of CCR, 2002, as the appellants did not maintain separate accounts for plastic crates. The Tribunal found that used plastic crates are not 'inputs' under Rule 6, and thus, the provisions of Rule 6(3)(b) did not apply. The Tribunal allowed the appeal, setting aside the demand and penalty. 4. Applicability of Rule 6(2) of the Cenvat Credit Rules, 2004 for common inputs like Furnace Oil (FO): In Appeal No. E/771/06, the appellants failed to maintain separate accounts for FO used in the manufacture of dutiable and exempted goods. The Tribunal noted that FO was brought under Rule 6(2) of CCR, 2004, by Notification No. 27/2005-C.E. (N.T.), dated 16-5-2005. The appellants had reversed the Cenvat credit availed on FO from 16-5-2005. However, the Tribunal upheld the demand for 10% of the sale price of 'Slice' cleared during the material period, finding the appellants liable under Rule 6(3)(b) of CCR, 2004. 5. Whether the reversal of Cenvat credit on common inputs negates the requirement to pay 8%/10% of the sale price of exempted goods: The appellants argued that subsequent reversal of Cenvat credit amounted to non-taking of credit on inputs, citing several judicial authorities. The Tribunal found that the cited decisions dealt with exemption Notifications and were not relevant to the present dispute. The Tribunal upheld the demand under Rule 6(3)(b) of CCR, 2004, for non-maintenance of separate accounts for FO, but reduced the penalty from Rs. 20 lakhs to Rs. 1 lakh. Conclusion: - Appeal No. E/43/06 was allowed, setting aside the demand and penalty. - Appeal No. E/771/06 was dismissed except for the reduction in the quantum of penalty from Rs. 20 lakhs to Rs. 1 lakh.
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