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TMI Blog2009 (5) TMI 435X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs in the impugned order is to the effect that, “the case of the Department is that reported maintenance of separate accounts is assumption based only and not on factual basis......”. From the above, it is clear that not only the inputs which are utilized in the manufacture of exempted goods should be identifiable or its quantity should also be ascertained at the first stage itself i.e at the time of receipt of inputs which are used in the manufacture of exempted goods. On this count itself, the impugned order is liable to be set aside and the matter is remanded to the Commissioner to consider whether the accounts maintained by the appellants satisfy the requirement of Rule 6(2) bearing in mind the observations hereinabove. Hence, the appeal succeeds. - E/697/2009 - 450/2009-EX (PB), - Dated:- 19-5-2009 - Justice R.M.S. Khandeparkar, President and Shri M. Veeraiyan, Member (T) Shri B.L. Narshimhan, Advocate, for the Appellant. Shri V. Choudhary, DR, for the Respondent. [Order per: Justice R.M.S. Khandeparkar, President (Oral)]. - Heard the learned advocate for the appellants and learned DR for the Revenue. 2. The appellants challenge the order dated 23rd Dece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order nowhere discloses any such exercise having been done by the authority, while the authority itself having clearly admitted that the appellants have maintained separately the accounts of the receipt, consumption and inventory of cenvated inputs and non-cenvated inputs. The only observation which had been made by the authorities is that, the said account is not in consonance with Rule 6(2). The fact, whether the accounts disclose separately the receipts, consumption and inventory of cenvated inputs from the non-cenvated inputs has not been ascertained. 5. The learned advocate for the appellants has also drawn our attention to the show cause notice wherein it is not disputed that after December, 2005, the appellants had transferred the cenvatable inputs to non-cenvetable account and the entries in relation to availment of cenvatable inputs has been reversed on the same day. This undisputed fact, according to the learned advocate, would clearly satisfy the requirement of law in terms of Rule 6(2) and in that connection attention is drawn to the decision of the Larger Bench of this Tribunal in the matter of Nicholas Piramel (I) Ltd. v Commissioner of Central Excise, Thane-I, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipulation and consequently for fraud. 8. Rule 6 of the said Rules deals with the obligation of manufacturer of dutiable and exempted goods. Sub-rule (1) thereof provides that, the Cenvat credit shall not be allowed on such quantity of input or input service which is used in the manufacture of exempted goods or for provision of exempted services, except in the circumstances mentioned in sub-rule (2). Obviously, therefore the sub-rule (1) clearly specifies that in order to avail Cenvat Credit in relation to the inputs used in the manufacture of the goods, the same cannot be availed in relation to such inputs utilized for manufacture of exempted goods. In other words, though under the other provisions of the said Rules, the manufacturer has been allowed to avail the Cenvat Credit in respect of the inputs utilized for the manufacture of the goods. 9. Sub-rule (2) of Rule 6 provides that, where a manufacturer or provider of output service avails of Cenvat credit in respect of any inputs or input services, and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch separate accounts in relation to the receipt, consumption and inventory of cenvated and non-cenvated inputs. The essence of Rule 6(2) is that the accounts maintained in relation to such inputs should distinctly and separately disclose the receipt, consumption and inventory of the inputs intended to be used in the manufacture of dutiable and exempted goods. It need not be in a specific form. It would suffice if the authority on the basis of the accounts, so maintained, can ascertain without any difficulty, the receipt, consumption and inventory of the inputs meant for the use in the manufacture of dutiable final products, separately from the receipt, consumption and inventory of the inputs meant for the use in the manufacture of exempted goods. Undoubtedly, in that regard, as rightly pointed out by the learned advocate for the appellants, a necessary scrutiny of the account submitted by the assessee to the Department is necessary. 13. The Apex Court in Kedarnath Jute Manufacturing Co. Ltd. (supra) has held that: "There is an understandable reason for the stringency of the provisions. The object of Section 5(2)(a)(ii) of the Act and the rules made thereunder is self-evident. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f fraud or introduces administrative inconveniences. To avoid any such possibility of commission of fraud or administrative inconveniences to ascertain the cenvated and non-cenvated inputs for the purpose of allowing the assessee to avail the benefit under Rule 6(2), undoubtedly, therefore, the assessee would be expected to maintain such accounts separately, but maintenance of accounts separately would not be in a particular form unless the form is prescribed for the same. Being so, it will be for the adjudicating authority to ascertain from whatever account which has been placed before it, whether the same discloses the account of cenvated inputs separately from that of non-cenvated inputs or not. If the same can be ascertained from the accounts maintained by the assessee, then it would be substantial compliance of the said Rule 6(2). 15. In the case of Nicholas Piramel (I) Ltd. (supra), the Larger Bench of this Tribunal, while dealing with the issue, as to whether the provisions of Rule 6(3)(b) of the Cenvat Credit Rules, 2002 are applicable or not when the amount equivalent to the Cenvat Credit attributable to the inputs used or in relation to the manufacture of exempted fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the impugned order discloses the finding to the effect that, "I find that it is not the case of the Department that the noticee have not at all maintained the separate accounts of receipt, consumption and inventory of cenvated inputs and non-cenvated inputs". 19. From the above findings read with the contents of the show cause notice, quoted above, it cannot be said that the appellants have not maintained the accounts in respect of cenvated inputs and non-cenvated inputs. What was necessary for the authorities to ascertain from his account, whether it discloses the accounts pertaining to the receipt, consumption and inventory of the inputs used in the manufacture of dutiable products separately from those used in the manufacture of exempted products. Indeed, the impugned order nowhere discloses any such exercises having been done by the authorities. On the contrary, the findings in the impugned order is to the effect that, "the case of the Department is that reported maintenance of separate accounts is assumption based only and not on factual basis......". From the above, it is clear that not only the inputs which are utilized in the manufacture of exempted goods should be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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