2007 (8) TMI 146 - AT - Central Excise

Cenvat/Modvat Revenue contended that appellant had not maintain separate account in respect of the inputs used in dutiable and exempted products but appellant contended that they had not taken any Cenvat credit on the inputs used in exempted product Allowed the appellants appeal with consequential relief

Issues involved:
- Challenge to demand of payment under Rule 6(3) read with Rule 12 of Cenvat Credit Rules/Rule 14 of the Cenvat Credit Rules, 2004
- Challenge to imposition of interest under Section 11AB read with Cenvat Credit Rules
- Challenge to penalty imposed under Rule 13(1) of the Cenvat Credit Rules, 2002/Rule 15(1) of Cenvat Credit Rules, 2004
- Classification of news print-in reels under Heading 48.01 and its impact on duty liability
- Maintenance of separate accounts for inputs used in dutiable and exempted products

Analysis:

1. Challenge to demand of payment under Rule 6(3) read with Rule 12 of Cenvat Credit Rules/Rule 14 of the Cenvat Credit Rules, 2004:
The appellants, manufacturers of paper, were proceeded against for clearing news print-in reels without paying duty. The Adjudicating Authority demanded a significant amount under various rules. However, the appellants argued that they do not take Cenvat credit for inputs used in exempted products. The Tribunal noted that since the appellants did not take any Cenvat credit for inputs used in exempted goods and maintained separate accounts, there was no justification for the demand. The Tribunal held that the impugned order was not sustainable in law, and the demand was set aside.

2. Challenge to imposition of interest under Section 11AB read with Cenvat Credit Rules:
The Adjudicating Authority imposed interest under Section 11AB read with Cenvat Credit Rules. However, the Tribunal, after considering the appellants' argument regarding the non-availment of Cenvat credit for exempted products, found no merit in the imposition of interest. Therefore, the Tribunal set aside the order imposing interest.

3. Challenge to penalty imposed under Rule 13(1) of the Cenvat Credit Rules, 2002/Rule 15(1) of Cenvat Credit Rules, 2004:
A penalty was imposed on the appellants under the relevant rules by the Adjudicating Authority. The appellants strongly challenged this penalty. The Tribunal, after analyzing the appellants' practice of not taking Cenvat credit for exempted products and maintaining separate accounts, found no justification for the penalty. Consequently, the Tribunal set aside the penalty imposed.

4. Classification of news print-in reels under Heading 48.01 and its impact on duty liability:
The Tribunal referred to a previous decision settling the classification of news print-in reels under Heading 48.01 with a nil rate of duty. This classification was crucial in determining the duty liability of the appellants. Since the appellants did not take Cenvat credit for inputs used in exempted products and the classification was clear, the Tribunal found no basis for demanding payment under the relevant rules.

5. Maintenance of separate accounts for inputs used in dutiable and exempted products:
The key contention of the appellants was their practice of not taking Cenvat credit for inputs used in exempted products and maintaining separate accounts. The Tribunal emphasized that maintaining separate accounts sufficed, and there was no requirement for physically segregating inputs used in dutiable and exempted products. As the appellants had not availed Cenvat credit for inputs in exempted products, the Tribunal found no merit in the Adjudicating Authority's objections. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief.

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