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2009 (8) TMI 493 - AT - Central ExciseCenvat Credit- Notification No. 10/96 dated 23-7-96- whether a manufacturer, who had not maintained separate accounts in relation of the inputs used in the manufacture of the final products which were chargeable to duty as well as those which were exempt from the whole of duty of excise or chargeable to nil rate of duty and had, at the end of the month, reversed the credit which was sought to be availed in relation to the inputs used in the exempted final product but after the clearance of the final products would still liable be liable to pay the amount in terms of Rule 57CC of the said Rules? Held that- The Trade Notice cannot travel beyond the mandate of a statutory rule, nor it can override the provisions of Rule. The said Trade Notice therefore, is of no help to the appellants in the case in hand. on the issue of penalty held that- the matter relates to the interpretation of rule and, therefore, there was no justification for imposition of any penalty in the matter. Hence, the impugned order to the extent it imposes penalty needs to be set aside. Thus, the appeal partly succeeds to the extent it relates to the penalty amount.
Issues Involved:
1. Liability under Rule 57CC for not maintaining separate accounts. 2. Applicability of Rule 57D(2). 3. Imposition of penalty. Detailed Analysis: 1. Liability under Rule 57CC for not maintaining separate accounts: The central issue was whether the manufacturer, who did not maintain separate accounts for inputs used in both dutiable and exempt final products and reversed the credit at the end of the month, is liable to pay the amount under Rule 57CC. The appellants argued that due to the practical difficulty of maintaining separate accounts, they reversed the credit at the end of the month, thus complying substantially with Rule 57CC. They relied on precedents, including *Hello Minerals Water (P) Ltd. v. UOI* and *Chandrapur Magnet Wires (P) Ltd. v. C.C.E., Nagpur*. The respondent contended that mere reversal of credit at the end of the month does not meet the requirements of Rule 57CC. Rule 57CC mandates that manufacturers must either pay 8% of the price of exempt final products at the time of clearance or maintain separate accounts for inputs. The Tribunal noted that the reversal of credit must occur before the clearance of the final product, as established in the Supreme Court's decision in *Chandrapur Magnet Wire (P) Ltd.* and incorporated into Rule 57CC. The Tribunal concluded that the appellants' reversal of credit after clearance does not comply with Rule 57CC, making them liable to pay the amount specified therein. 2. Applicability of Rule 57D(2): The appellants argued that denial of credit would violate Rule 57D(2), which states that credit should not be denied for intermediate products or inputs used in capital goods. However, the Tribunal found this rule inapplicable because the appellants voluntarily reversed the credit, and there was no denial by the Department. The Tribunal emphasized that Rule 57CC's requirements for maintaining separate accounts or paying 8% of the price at clearance are mandatory and cannot be overridden by Trade Notices or misinterpretations of Rule 57D. 3. Imposition of penalty: The Tribunal acknowledged that the case involved interpretation of rules, which justified setting aside the penalty imposed. The Tribunal found no justification for penalizing the appellants under these circumstances. Conclusion: The appeal was partly allowed, setting aside the penalty. The Tribunal confirmed the orders of the Commissioner (Appeals) and the original authority regarding the liability under Rule 57CC. The appellants were held liable for not maintaining separate accounts and reversing credit after clearance, but the penalty was deemed unjustified and was removed.
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