2008 (1) TMI 211 - AT - Central Excise

Common inputs in exempted & dutiable goods - contention of the Revenue that appellants had not manufactured and cleared any dutiable goods but have only manufactured exempted goods, therefore appellants are not entitled for credit of duty paid on inputs, is acceptable even if 8% of value of exempted goods is paid, credit is not allowed because only exempted goods are manufactured & cleared without payment of duty since part of demand is time barred, penalty is reduced

Summary

Issues:
- Denial of credit for inputs used in manufacturing exempted and dutiable goods
- Allegation of suppression of facts and time-barred demand
- Imposition of penalty on the firm and the director

Denial of credit for inputs:
The appellants, engaged in manufacturing both exempted and dutiable goods, availed credit for common inputs used in production. However, the Revenue contended that as the appellants only manufactured exempted goods during a specific period, they were not entitled to credit under Central Excise Rules and Cenvat Credit Rules. The Tribunal found merit in this argument, ruling that since the appellants only produced exempted goods during the relevant period, they were not eligible for credit.

Allegation of suppression of facts and time-barred demand:
The appellants argued that the demand for a certain period was time-barred as no suppression could be alleged against them. They cited a Supreme Court decision to support their claim that the second show cause notice alleging suppression was not sustainable since all relevant facts were known to the authorities when the first notice was issued. The Tribunal agreed, setting aside the demand for the time-barred period based on the Supreme Court's ruling.

Imposition of penalty:
Regarding the penalty imposed on the firm and the director, the Tribunal noted that despite being aware of the rules, the appellants wrongly availed credit for goods cleared without duty payment. The penalty on the firm was deemed justified, but considering the time-barred demand, it was reduced to Rs. 1 lakh. The director was also held liable for penalty due to conflicting statements but had his penalty reduced to Rs. 25,000 based on the circumstances. Both appeals were disposed of accordingly, with the Tribunal upholding the denial of credit for inputs used in manufacturing exempted goods, setting aside the time-barred demand, and adjusting the penalties imposed on the firm and the director.