2006 (3) TMI 459 - AT - Central Excise

Summary

Issues:
1. Whether the appellant is liable to reverse 8% of the value of goods as required under Rule 57AD(2) read with Rule 6(3)(b) of Cenvat Credit Rules, 2002 when clearing exempted silicon nipples made out of Cenvat credit taken inputs.

Analysis:
The appeal in question stemmed from a show cause notice issued to the appellant regarding the manufacturing of feeding bottles, pet bottles, and silicon nipples under Chapter Heading 39.23. The appellant cleared silicon nipples at a 'NIL' rate of duty under Notification No. 3/2001 dated 1-3-2001 as amended, while also manufacturing feeding bottles using captively consumed silicon nipples. The issue at hand was whether the appellant was obligated to reverse 8% of the value of goods when clearing exempted silicon nipples made from Cenvat credit inputs. The Revenue contended that the appellant failed to reverse the required amount during a specific period, leading to duty confirmation.

During the proceedings, it was highlighted that the Central Board of Excise and Customs (CBEC) had clarified in Circular No. 754/70/2003-CX., dated 9-10-2003 that no action was necessary when separate accounts were maintained, and credits were reversed. Additionally, the Finance Act, 2005, retrospectively amended certain sections, indicating that clearances made under specific notifications were valid. The appellant argued that their clearance of exempted final products fell within the valid clearance period under the Finance Act, 2005. The Act also specified that no recovery could be made for amounts like duty or interest, which had not been collected or demanded during the relevant period.

Considering these points, it was determined that the 8% amount demanded on the price of final products cleared during the disputed period was categorized under "Other Charges" and could not be recovered. Since the appellant had correctly reversed the input credit for exempted goods, the demand for 8% of the amount was deemed unnecessary. Both authorities acknowledged this fact, leading to the conclusion that the impugned order could not be upheld. Consequently, the appeal was allowed, with any consequential relief granted as necessary.