2012 (5) TMI 540 - AT - Central Excise

Manufacturing both dutiable as well as exempted goods - Non Maintenance of separate account for inputs/input service credit for dutiable as well as exempted goods - Held that - applicant has done trading activity and they have not undertaken any activity of manufacturing of the exempted goods. Therefore, prima facie, the applicants are not required to reverse 10% of the value of their clearance of the traded goods. Therefore, the applicants have made out a case for 100% waiver of pre-deposit of the amount of duty, interest and penalties imposed on the main applicant and the co-applicant - Stay granted.

Summary

Issues: Duty demand on manufacturing both dutiable and exempted goods without maintaining separate accounts.

Analysis:
The Appellate Tribunal CESTAT MUMBAI addressed a duty demand issue amounting to Rs. 41,40,642/- against the applicant due to the lack of separate accounts for dutiable and exempted goods. The Tribunal noted that the applicants were involved in manufacturing palladium and platinum catalyst, which were cleared after paying duty. However, the Tribunal observed that the applicants engaged in trading exempted goods without availing input service credit, leading to the duty demand discrepancy. The applicant, through their counsel, presented evidence in the form of purchase and sales invoices demonstrating VAT payments on the exempted goods traded. The Tribunal acknowledged that the applicants did not manufacture exempted goods but only engaged in trading activities, thereby justifying a 100% waiver of the duty, interest, and penalties imposed. Consequently, the Tribunal granted a stay on the recovery of the mentioned amounts during the appeal process, considering the absence of manufacturing exempted goods and the lack of duty liability on the trading activity.

This judgment highlights the importance of maintaining separate accounts for dutiable and exempted goods to avoid duty demand discrepancies. It underscores the significance of providing concrete evidence, such as purchase and sales invoices, to support claims regarding VAT payments on exempted goods traded. The decision also emphasizes the necessity of differentiating between manufacturing and trading activities to determine duty liabilities accurately. Additionally, the Tribunal's decision to grant a waiver and stay on recovery showcases the consideration given to the nature of the applicant's operations and the absence of duty obligations on the trading of exempted goods without availing input service credit.