2012 (7) TMI 81 - AT - Central Excise

Cenvat Credit - Rule 6 - Non maintenance of Separate account input used for manufacture of waste - appellant is engaged in the manufacture of sugar and during the course of manufacture of sugar, a product press-mud emerges which is actually a waste and by itself cannot be of much use, which is further processed and mixed with Spent Wash and Bio-compost emerges Held that - Press-mud and spent wash emerged during the course of sugar have been further processed which resulted in exempted product Bio-compost. Just because the press mud is processed further resulting in exempted product, it cannot be said that the appellant is required to maintain separate accounts - appellant was not required to reverse the 10% of the value of press mud under Rule 6 of CENVAT Credit Rules, 2004 - appeal is allowed with consequential relief to the appellant.

Summary

Issues:
1. Requirement of maintaining separate accounts for dutiable product and exempted product.
2. Imposition of penalty under Section 11AC of Central Excise Act, 1944.
3. Payment of 10% of the value of bio-compost under Rule 6(3) of CENVAT Credit Rules.

Analysis:

Issue 1: Requirement of maintaining separate accounts for dutiable product and exempted product
The appellant, engaged in sugar manufacturing, faced a demand from Revenue to pay 10% of the value of bio-compost sold due to the absence of separate accounts for dutiable product and bio-compost. The appellant argued that emergence of waste or by-product during manufacturing does not mandate separate accounts, citing decisions of Hon'ble High Courts. The Tribunal concurred, emphasizing that the emergence of press-mud and spent wash during sugar production, further processed into bio-compost, does not necessitate separate accounts. The Tribunal relied on precedents like Rallis India Ltd. case and CCE Visakhapatnam Vs. Sri Sarvarya Sugar Ltd. to support the appellant's stance, ultimately allowing the appeal in favor of the appellant.

Issue 2: Imposition of penalty under Section 11AC of Central Excise Act, 1944
The Revenue imposed a penalty under Section 11AC of the Central Excise Act, 1944, due to the alleged non-compliance with maintaining separate accounts. However, the Tribunal, guided by legal precedents and the appellant's arguments, found no merit in the penalty imposition. The Tribunal's decision to waive the pre-deposit requirement and proceed with final disposal of the appeal signifies the rejection of the penalty imposition, aligning with the legal position established by the cited High Court decisions.

Issue 3: Payment of 10% of the value of bio-compost under Rule 6(3) of CENVAT Credit Rules
The Revenue contended that 10% of the sales price of bio-compost should be paid due to the absence of separate accounts. The appellant successfully argued against this demand, emphasizing that the emergence of press-mud and spent wash as waste by-products during sugar manufacturing does not necessitate such payment. The Tribunal's reliance on legal precedents and the appellant's submissions led to the allowance of the appeal, providing consequential relief to the appellant and rejecting the requirement of paying 10% under Rule 6(3) of CENVAT Credit Rules.

In conclusion, the Tribunal's judgment, guided by legal precedents and the appellant's arguments, resolved the issues in favor of the appellant, emphasizing that the emergence of waste by-products during manufacturing does not mandate separate accounts or payment obligations as asserted by the Revenue.