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2007 (5) TMI 629 - AT - Central ExciseCENVAT credit - demand of 10% of the value of 314160.229 MTs of exempted goods - non-maintenance of separate records for dutiable and exempt goods - Held that - Even though the appellants have not maintained separate accounts they have reversed the credit taken and attributable to the goods cleared free of duty before the removal of the goods from the factory - the condition of non- availment of input credit in respect of Notification 30/2004 is satisfied - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Confirmation of duty amount and penalty under Cenvat Credit Rules. 2. Reversal of Cenvat credit and its impact on the duty liability. 3. Timeliness and validity of the show cause notice. 4. Requirement to maintain separate records for inputs used in exempted and dutiable goods. 5. Financial hardship and justification of the duty amount. Detailed Analysis: 1. Confirmation of Duty Amount and Penalty under Cenvat Credit Rules: The Commissioner of Central Excise, Mangalore confirmed a duty amount of Rs. 84,95,66,016/- and a penalty of Rs. 1,00,000/- under Section 11A of the CE Act. This was based on the allegation that the appellants did not maintain separate records for inputs used in the manufacture of exempted goods under Chapter 15 of the CET Act 1985 during the period from March 2005 to January 2006. The Tribunal reviewed the case and noted that the appellants had reversed the credit taken on inputs used in the manufacture of exempted goods, which was a crucial point in their defense. 2. Reversal of Cenvat Credit and Its Impact on the Duty Liability: The appellants argued that they had reversed the credit in respect of inputs used for exempted goods, citing several judgments to support their claim that once credit is reversed, they are not required to pay 10% of the value of the exempted goods. The Tribunal referred to multiple precedents, including the Larger Bench judgment in Franco Italian Co. Pvt. Ltd. vs. CCE Mumbai-II and the Supreme Court ruling in Chandrapur Magnet Wires (P) Ltd., which established that reversal of credit negates the need to pay 10% of the value of exempted goods. 3. Timeliness and Validity of the Show Cause Notice: The appellants contended that the show cause notice issued on 3.4.06 for the period March 2005 to January 2006 was barred by time, as all details had been informed to the department, and there was no suppression of facts, misrepresentation, or misdeclaration. This argument was not directly addressed in the final judgment, but it was part of the appellants' defense strategy. 4. Requirement to Maintain Separate Records for Inputs Used in Exempted and Dutiable Goods: The core issue was whether the appellants were required to pay 10% of the value of exempted goods due to their failure to maintain separate records for inputs used in both exempted and dutiable goods. The Tribunal found that the appellants had already reversed the credit taken on inputs, thus negating the need to maintain separate records. The Tribunal cited several judgments supporting the view that reversal of credit is sufficient to comply with the rules. 5. Financial Hardship and Justification of the Duty Amount: The appellants highlighted the financial hardship posed by the astronomical duty amount of Rs. 84,95,66,016/-, which was disproportionate to the reversed credit of Rs. 26,59,546/-. The Tribunal noted that the revenue had not provided a clear calculation for the duty amount, which appeared unjustified. The Tribunal granted a full waiver of pre-deposit and stayed its recovery till the disposal of the appeal, citing the appellants' financial hardship and the lack of justification for the duty amount. Conclusion: The Tribunal concluded that the issue was no longer res-integra, as it had been settled by multiple judgments. The appeal was allowed with consequential relief, emphasizing that once the credit is reversed, there is no need to pay 10% of the value of exempted goods. The Tribunal's decision was based on established legal precedents and the specific facts of the case, providing a comprehensive resolution to the issues raised.
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