2008 (10) TMI 231 - AT - Central Excise

Cenvat Credit Common Inputs No separate accounts Rule 6 read with Rule 14 and 15 of Cenvat Credit Rules, 2004 held that - since the Liquid Nitrogen in questions has been cleared at nil rate of duty and the same has been manufactured from the duty-paid Nitrogen, credit in respect of which has been taken, the duty-demand at the rate of 8% of the value of nil rated clearance is in order and the same it confirmed along with the interest on the same. However, considering the circumstances of the case and the fact that the Appellants have given all particulars in their regular returns, this is not a fit case for imposition of penalty and therefore, the penalty is waived.

Summary

Issues:
CENVAT credit on duty-paid Nitrogen, clearance of Liquid Nitrogen at nil rate of duty, maintaining separate accounts, duty demand at 8% of nil rated clearance, penalty imposition, waiver of penalty.

Analysis:
The case involved a dispute regarding CENVAT credit on duty-paid Nitrogen used to manufacture Liquid Nitrogen, which was cleared at a nil rate of duty for storing semen for artificial insemination of cattle. The Appellants argued that maintaining separate accounts for the different uses of Nitrogen was impractical due to the manufacturing process. They admitted to not paying 8% of the value of the nil rated clearance earlier, attributing it to ignorance of legal provisions. The Appellants agreed to pay the amount by debiting from CENVAT Credit and requested leniency in penalty imposition.

The learned Advocate for the Appellants contended that despite filing regular returns reflecting the clearances made with and without duty payment, the Department did not point out the non-payment of 8% duty credit on nil rated clearance. The Appellants sought a waiver of the penalty, emphasizing their willingness to pay the required duty amount. The Department supported the impugned Order, highlighting the Appellants' failure to maintain separate accounts for the different uses of Nitrogen.

After hearing both sides, the Member (T) of the Appellate Tribunal concluded that the duty demand at 8% of the value of nil rated clearance was justified since the Liquid Nitrogen was manufactured from duty-paid Nitrogen for which credit was taken. The Tribunal confirmed the duty demand along with interest but decided to waive the penalty considering the circumstances of the case. The decision was based on the Appellants' disclosure in regular returns and their willingness to rectify the non-compliance by debiting the CENVAT Credit. As a result, the Appeal was partly allowed, with the penalty being waived.

In summary, the Tribunal upheld the duty demand at 8% of the value of nil rated clearance of Liquid Nitrogen but waived the penalty due to the Appellants' cooperation in rectifying the non-compliance and their disclosure in regular returns. The decision emphasized the importance of compliance with legal provisions and the significance of maintaining accurate records despite the practical challenges faced by the Appellants in this case.