2011 (11) TMI 567 - AT - Central Excise

Duty demand - Revenue contends that appellants should have paid 10% of the value of zinc dross under Rule 6(4) of Cenvat Credit Rules, 2004 because there was no excise duty on zinc dross - Held that - Prima facie, I see merit in the contention of the appellant inasmuch as it is not practicable to have separate storage of zinc dross imported and zinc dross manufactured. Rule 6 of Cenvat Credit Rules itself envisages separate account only. When they are able to show import of quantity of zinc dross more than the quantity cleared, I do not prima facie see any reason to ask for 10% of the value of the goods as per Rule 6. Therefore, I waive requirement of pre-deposit of dues arising from the impugned order and there shall be stay on collection of such dues during the pendency of the appeal - Stay granted.

Summary

Issues:
Interpretation of Rule 6(4) of Cenvat Credit Rules, 2004 regarding payment on zinc dross clearance.

Analysis:
The case involved the appellants who imported zinc dross and manufactured zinc ingots and zinc sulphur from the residue. The Revenue argued that 10% of the value of zinc dross should be paid under Rule 6(4) as there was no excise duty on zinc dross. The appellants contended that since they imported zinc dross on which countervailing duty was not paid, no amount was required to be paid under Rule 6(2). The Revenue claimed that as zinc dross was not stored separately, 10% of the value of the product cleared should be paid under Rule 6(4) due to manufacturing an exempted product.

The Tribunal considered both arguments and found merit in the appellant's contention. It was noted that separate storage of imported zinc dross and manufactured zinc dross was not practical. Rule 6 of Cenvat Credit Rules requires a separate account, not separate storage. Since the appellants could demonstrate importing a quantity of zinc dross greater than the quantity cleared, there was no prima facie reason to demand 10% of the value of the goods under Rule 6. Consequently, the Tribunal waived the pre-deposit of dues from the impugned order and ordered a stay on the collection of such dues during the appeal's pendency. The decision was made to address the practical challenges faced by the appellants in maintaining separate storage for imported and manufactured zinc dross while complying with the provisions of Rule 6.

This judgment highlights the importance of interpreting tax rules in a practical and reasonable manner, considering the operational constraints faced by businesses. It also underscores the significance of maintaining accurate records to substantiate claims and comply with regulatory requirements.