2019 (8) TMI 1020 - AT - Central Excise

CENVAT Credit - non-maintenance of separate account for dutiable as well as exempted goods - Rule 6(3) of Cenvat Credit Rules, 2004 - HELD THAT - Rule 6(3) is applicable when assessee is manufacturing dutiable as well as exempted final product. In this case, the goods manufactured by the appellant are not exempted goods that these goods are dutiable goods. The said goods were cleared to special category of customer under Notification No. 10/1997-CE dated 01.03.1997. The appellant is not liable to pay any amount, interest and penalty - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Non-maintenance of separate account for dutiable and exempted goods under Rule 6(3) of Cenvat Credit Rules, 2004.

Analysis:
The case involved a demand raised against the appellant for not maintaining separate accounts for dutiable and exempted goods as per Rule 6(3) of the Cenvat Credit Rules, 2004. The appellant, a manufacturer of various goods, had cleared some goods to a specific customer without payment of duty under Notification No. 10/1997-CE. The Revenue argued that since the goods were cleared without duty payment and separate accounts were not maintained, the appellant should pay 5% to 6% of the value of goods cleared to the customer. The appellant contended that the provisions of Rule 6(3) were not applicable as they were manufacturing dutiable goods and the goods cleared were to an exempted customer. The appellant relied on precedents like CCE v. Tanfac Industries Ltd. and SU Motors Pvt. Ltd. v. CCE, Mumbai to support their argument.

The Authorized Representative for the Department opposed the appellant's contentions, stating that since the goods were cleared to an exempted customer, the appellant was manufacturing exempted goods and should maintain separate accounts. After hearing both parties, the Member (Judicial) analyzed the situation and concluded that Rule 6(3) applies when the assessee manufactures both dutiable and exempted final products. In this case, the goods manufactured were not exempted, but rather dutiable goods cleared to a special customer under the mentioned notification. Citing the judgments in Tanfac Industries Limited and SU Motors Pvt. Limited, the Member held that the appellant was not liable to pay the demanded amount, interest, or penalty. Consequently, the impugned order was set aside, and the appeal was allowed.