2005 (8) TMI 738 - AT - Central Excise

Summary

Issues:
Appeal against Order-in-Appeal regarding CENVAT credit reversal on common inputs used for dutiable and exempted products, demand of duty at 8% of sale value of exempted goods, penalty imposition, and time limitation for demand.

Analysis:
The appellants, manufacturers of bulk drugs and drug intermediaries, availed CENVAT credit on duty paid on inputs used for both dutiable and exempted final products. They reversed credit for inputs used in exempted products before production and declared it in their monthly returns. The Revenue demanded payment of 8% of sale value of exempted products under Rule 6(3)(b) of CENVAT Credit Rules, 2002, and imposed a penalty. The appellants contended that their credit reversal satisfied Rule 6 and cited relevant case laws supporting their position. They argued that maintaining separate accounts was fulfilled through credit reversal method, supported by additional case laws and circulars. They also claimed the demand for the period prior to November 2002 was time-barred, citing case laws to support their stance. Consequently, they argued against sustaining penalties and interest under relevant sections.

The Tribunal reviewed the case records and legal arguments. It noted the dispute over availing CENVAT credit for common inputs used in dutiable and exempted products. Citing precedents, the Tribunal emphasized that once credit for exempted products is reversed, no duty payment at 8% of sale value is required. It referenced relevant case laws and its own previous decisions to support this position. The Tribunal highlighted the Supreme Court's stance on credit reversal indicating no credit taken on inputs, allowing for exemption benefits. Consequently, the Tribunal held that the lower authorities' orders were unsustainable and allowed the appeals with consequential relief. It found no justification for invoking the extended period due to the credit reversal information being provided in the ER 1 Return. As a result, both appeals were allowed, and the orders were set aside.

In conclusion, the Tribunal's judgment favored the appellants, emphasizing the validity of credit reversal for exempted products, the fulfillment of separate account maintenance requirements, and the time limitation for demands. The decision highlighted relevant case laws, circulars, and legal principles to support the appellants' position, ultimately leading to the allowance of the appeals and rejection of penalties and interest under specific sections.