2011 (6) TMI 42 - HC - Central Excise

Classification - Exemption under notification No.6/2006-CE dated 01.03.2006 - Rule 6 of CCR 2004 with effect from 01.04.2008 - petitioner pleaded that when there was a direction given by the Tribunal to adjudicate the matter afresh the respondent took a stand that the demand for the period from April 2008 to December 2008 which is subject matter of the show cause notice No.24/2009 dated 05.03.2009 need not be adjudicated is clear violation of the order passed by the Tribunal. - Held that - If this is the grievance the petitioner should have approached the Tribunal as he has got statutory right of appeal under Section 35 B of the Central Excise Act 1944. - it is to be noted that this Court while entertaining the writ petition has granted interim order of stay and the same is also continued till now - Decided in the favor of assessee

Summary

Issues:
1. Interpretation of Rule 6 of Cenvat Credit Rules, 2004 regarding maintenance of separate records for availing Cenvat Credit on inputs used in manufacturing dutiable final products and exempt products.
2. Application of proportionate reversal concept introduced in Rule 6 of CCR, 2004 from 1st April 2008.
3. Adjudication of differential Excise Duty and penalty imposition based on failure to maintain separate records for dutiable and exempt products.
4. Discrepancy in the period of adjudication by the respondent and the direction given by the Tribunal.
5. Availability of alternative statutory appeal remedy under Section 35 B of the Central Excise Act, 1944.

Detailed Analysis:
1. The petitioner, a manufacturer of Gear Box Assembly and Gear Motor Assembly, availed Cenvat Credit under Cenvat Credit Rules, 2004. The issue arose regarding the maintenance of separate records for Cenvat Credit on inputs used in manufacturing dutiable final products and exempt products, as per Rule 6 of CCR, 2004. Failure to maintain separate records required payment of 10% (now 5%) on the value of exempt products. The petitioner argued that they followed the Supreme Court's ratio in Chandrapur Magnet Wires case and reversed the proportionate Cenvat Credit for exempted goods. The respondent disagreed, leading to a demand for Excise Duty and penalty imposition.

2. The introduction of the proportionate reversal concept in Rule 6 of CCR, 2004 from 1st April 2008 was a key issue. The Government provided three alternatives for compliance: maintaining separate records, paying 10% (now 5%) on exempt products, or calculating and reversing the actual Cenvat Credit relating to exempt products. The petitioner's compliance with this amendment was contested by the respondent, leading to the demand for differential Excise Duty and penalty.

3. Adjudication of the differential Excise Duty and penalty was based on the petitioner's failure to maintain separate records for dutiable and exempt products. The respondent's order confirmed the demand and penalty, leading to the petitioner's appeal to higher authorities, including the Tribunal. The Tribunal remanded the matter for fresh adjudication, resulting in the respondent's confirmation of the demand and penalty, which was challenged in the present writ petition.

4. A discrepancy arose regarding the period of adjudication by the respondent and the direction given by the Tribunal. The petitioner contended that the respondent proceeded to confirm the demand for a period not covered by the Tribunal's remand order. This discrepancy formed a significant part of the petitioner's challenge to the impugned order.

5. The availability of an alternative statutory appeal remedy under Section 35 B of the Central Excise Act, 1944 was raised. The respondent argued that the writ petition was wrongly filed before the High Court, emphasizing the availability of appeal before the CESTAT, Chennai. This issue highlighted the procedural aspect of seeking redressal through the appropriate legal channels.