2008 (6) TMI 317 - AT - Central Excise

Use of common inputs in welding machines (which are dutiable) and medical equipments (which are exempted) - It has been argued on behalf of the Appellants that it is not practicable for them to maintain separate account for how much of brass is required to be consumed in the manufacture of medical equipments and how much for welding machines. The Department has levied 8% of the amount on the exempted medical equipments on the ground that no separate account has been maintained. - In similar situations where it was not practicable to maintain separate accounts of the inputs used in the exempted and dutiable finished goods, this Bench has taken a view that in the absence of separate Rule to deal with such a situation, it would be reasonable to ask the manufacturers to reverse the proportionate amount of credit. Accordingly we set aside the impugned order and remand the matter to the original Authority to check the calculation of the proportionate credit made by the Appellants and adjust the amount paid by the Appellants against the calculated amount which is payable by the Appellants.

Summary

Issues:

1. Calculation of duty credit on inputs used for exempted and dutiable goods without separate accounts.

Analysis:

The case involved a dispute regarding the calculation of duty credit on inputs used for manufacturing exempted medical equipment and dutiable welding machines without maintaining separate accounts. The Appellants argued that it was impractical for them to segregate the usage of inputs between the two types of goods. The Department had levied 8% duty on the exempted medical equipment due to the absence of separate accounts, resulting in a demand of Rs. 35,56,983. The Appellants calculated the proportionate credit of inputs used in the exempted goods to be Rs. 1,61,833.

The Appellants, subsequent to filing the appeal, deposited the calculated amount of proportionate duty and the interest thereon. However, the Authorities had not verified the calculations made by the Appellants as the payment was made at a later stage. The Bench noted that in similar situations where maintaining separate accounts was not feasible, it was reasonable to require manufacturers to reverse the proportionate amount of credit. Consequently, the impugned order was set aside, and the matter was remanded to the original Authority to verify the Appellants' calculation and adjust the payment made by them against the payable amount. Upon such adjustment, the demand was set aside along with the penalty imposed, and the appeal was allowed accordingly.

In conclusion, the Tribunal's decision provided a practical approach to dealing with situations where maintaining separate accounts for inputs used in exempted and dutiable goods was not feasible. By requiring the reversal of proportionate credit in the absence of specific rules, the Tribunal aimed to ensure fair treatment for manufacturers facing such challenges in their operations.