2007 (5) TMI 127 - AT - Central Excise

Cenvat/modvat - Department contended that Crude Coal Tar/Spilled Tar sold by the appellants without payment of duty and accordingly demand were made - After considering the fact matter remanded for fresh consideration

Summary

Issues:
1. Pre-deposit requirement for penalty amount.
2. Input duty credit on various items used for production.
3. Demand of duty on unusable coke and Crude Coal Tar/Spilled Tar.
4. Applicability of Rule 57CC on maintaining separate accounts.
5. Reversal of proportionate credit for goods sold without payment of duty.

Analysis:

Issue 1 - Pre-deposit requirement for penalty amount:
The advocate representing the appellants argued that no pre-deposit was required for the demand amount related to the sale of unusable coke and Crude Coal Tar/Spilled Tar, as it was not in the nature of duty. However, he acknowledged the need to pre-deposit the penalty amount of Rs. 20,00,000. The Tribunal waived the pre-deposit requirement for the penalty amount considering a prima facie case in favor of the appellants.

Issue 2 - Input duty credit on various items used for production:
The appellants claimed input duty credit on several items used in the production process, including Alum Ferric, Sulphuric Acid, Caustic Soda Flake/Lye, and others. These items were utilized for producing demineralized water, essential for generating steam/electricity used in coke production. The advocate argued that the total credit availed was Rs. 36,34,318, while the demand imposed was Rs. 2,79,00,570. The Tribunal noted the challenge in maintaining separate accounts due to the continuous production process.

Issue 3 - Demand of duty on unusable coke and Crude Coal Tar/Spilled Tar:
The Department issued show cause notices demanding duty on the sale of coke and Crude Coal Tar/Spilled Tar without payment. The advocate contended that the proportionate credit for non-dutiable goods was significantly lower than the demanded amount. The Tribunal found merit in the appellants' submissions, emphasizing the practical challenges in segregating inputs for off-grade products and the disproportionate demand compared to the actual credit availed.

Issue 4 - Applicability of Rule 57CC on maintaining separate accounts:
The Tribunal analyzed the application of Rule 57CC, which requires maintaining separate accounts for inputs related to final goods cleared without duty payment. Acknowledging the difficulty in segregating inputs due to the continuous production process, the Tribunal concluded that justice would be served by allowing the reversal of proportionate credit for off-grade products, rather than enforcing the full demand amount.

Issue 5 - Reversal of proportionate credit for goods sold without payment of duty:
Citing a similar case precedent, the Tribunal directed the appellants to reverse the proportionate credit linked to goods sold without duty payment. The matter was remanded for recalculating the credit amount, considering a reasonable accounting method. The Tribunal emphasized fairness in the calculation process and instructed the original authority to issue a fresh order after hearing the appellants.

In conclusion, all seven appeals were allowed by way of remand, with specific instructions for calculating and adjusting the proportionate credit amount, ensuring a fair resolution of the dispute.