2004 (8) TMI 204 - AT - Central Excise

Summary

Issues:
1. Controversy over abatement of 35% from MRP for calculating the price of goods under Central Excise Rules.
2. Failure to maintain separate records for exempted and dutiable goods.
3. Claiming Modvat credit on inputs used for exempted goods.
4. Legal sustainability of the duty demand and penalty imposed.

Issue 1:
The appeal questioned the entitlement to abatement of 35% from MRP while calculating the price of goods for payment under Central Excise Rules. The lower authorities disallowed this abatement, leading to a differential demand and penalty against the appellants. The Tribunal found that the appellants, engaged in manufacturing exempted and dutiable goods, failed to maintain separate records as required. The contention for abatement of 35% of MRP was deemed misconceived as Rule 57CC mandates payment of 8% of the total price excluding sales tax and other taxes, without provision for abatement. The demand raised and confirmed by lower authorities was considered correct.

Issue 2:
The failure to maintain separate records for inputs used in manufacturing exempted goods led to the demand for payment of 8% of the total price of exempted goods cleared. The Tribunal noted that the appellants wrongly availed Modvat credit on inputs without maintaining the necessary records. The demand was upheld as enforceable under the law, distinct from duty or Modvat credit recovery. Precedents cited regarding recovery machinery for 8% under Rule 57CC were deemed inapplicable to the present case. The appellants' argument for abatement was consistently rejected by the lower authorities.

Issue 3:
Regarding the legal sustainability of the duty demand, the Tribunal found no illegality in the impugned order confirming the duty amount against the appellants. However, considering the circumstances, the penalty imposed was reduced to Rs. 50,000. The appellants' plea for abatement of 35% of MRP was consistently rejected, and the impugned order was upheld with the modified penalty.

In conclusion, the Tribunal upheld the demand for payment of 8% of the total price of exempted goods, rejected the claim for abatement of 35% from MRP, and reduced the penalty imposed on the appellants. The judgment emphasized the importance of maintaining separate records for exempted and dutiable goods and complying with Central Excise Rules to avoid such disputes and penalties in the future.