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TMI Blog2009 (10) TMI 347X X X X Extracts X X X X X X X X Extracts X X X X ..... at Credit Rules 2004. The impugned order also demanded applicable interest on the above amount under Section 11AB of the Act read with Rule 12/14 of Cenvat Credit Rules 2002/2004. Equal amount of penalty as the amount demanded has been imposed on the appellants under Section 11AC of the Act read with the relevant Cenvat Credit Rules and Section 78 of the Finance Act 1994. The Commissioner found that the appellants engaged in the manufacture of dutiable aerated water, Limca and Sprite and exempted fruit pulp based drink Maaza, had taken and utilized cenvat credit on common inputs and input services during the period 4/03 to 12/07 without maintaining separate accounts for receipt, consumption and inventory of inputs and input services. As the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 5,95,648/- in their RG 23 A Part II register on 21-4-2008 and paid the applicable interest of Rs. 96,425/- under TR-6 Challan on 5-5-08. The show cause notice in the instant case was issued on 1-5-2008 after they had debited the cenvat credit relatable to Maaza cleared during the material period. The appellants had contested the demand for an amount in terms of Rules 6(3)(b) of the CCR on the ground that the inputs involved were not direct inputs for manufacture of Maaza but were water treatment chemicals and therefore they were not required to pay any amount as envisaged in Rule 6 of CCR. They had submitted before the adjudicating authority that they had reversed the cenvat credit relatable to clearances of Maaza made during the mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect that reversal of Cenvat credit on common inputs was adequate Compliance of Rule 6 vide its decision in the case of CCE v. Maize Products - 2009 (234) E.L.T. 431 (Guj.) = 2008-TIOL-596-HC-AHM-CX. Following decision/judgements are relied on in support of the claim that when the credit taken on that portion of inputs used in the manufacture of exempted products is reversed, the effect would be as if no credit was availed on the inputs used in the manufacture of exempted products: (i) Chandrapur Magnet Wires (Pvt.) Ltd. [1996 (81) E.L.T. 3 (S.C.)] (ii) CCE, Mumbai v. Philips India Ltd. [2006 (200) E.L.T. 106 (Tri. - Mum.]. Reliance is also placed on the decision of the Tribunal in the case Pepsico India Holdings Ltd. v. CCE, Chennai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facture of exempted goods and take CENVAT credit only on if at quantity of inputs which is intended for use in the manufacture of dutiable goods" Rule 6(3)(b) "if the exempted goods are other than those described in condition (a), the manufacturer shall pay an amount equal to eight per cent of the total price, excluding sales tax and other taxes, if any, paid on such goods, of the exempted final products charged by the manufacturer for the sale of such goods at the time of their clearance from the factory" Rule 6 of CCR 2004 incorporates similar procedure as regards also input services used in relation to manufacture of dutiable and exempted goods. 5.2 In the instant case, the appellants received water treatment chemicals and input servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose not on account of any contumacious conduct. Penalty could not be imposed just because the statute provided for the same. They relied on the case law of Hindustan Steel Ltd. v. State of Orissa [1978 (2) E.L.T. (J159)] in support of this claim. 6. We find that the Cenvat scheme is a benevolent legislation intended to avoid cascading effect of tax on goods manufactured, by allowing credit of duty paid on inputs. In order to implement this objective, while credit is allowed of the duty paid on inputs that are used in the manufacture of final product on which duty is paid, credit is not allowed of duty paid on inputs used in the manufacture of exempted final products. Allowing credit on common inputs introduces an anomaly inconsistent with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. By implementing the provisions in the manner as ordered by the Commissioner, astronomical sums are demanded for taking credit of relatively small amounts, for instance in CCE, Mumabi-VI v. Philips India Ltd. [2006 (200) E.L.T. 106 (Tri.-Mumbai)] Rs. 1,09,21592 was demanded in the impugned order for taking inadmissible credit of Rs. 87569/-, in Ruchi Soya Industries Ltd v. CCE, Mangalore [2007 (82) RLT 624 (Cestat -Bang.)] the demand impugned was Rs. 84,95,66,016/- for taking credit of Rs. 26,59,546/- and in Sirpur Paper Mills v. CCE, Hyderabad [2006 (205) E.L.T. 188 (Tribunal) = (2005 (71) RLT 336 (CESTAT-Ban.)], the corresponding figures were Rs. 2.6 crores and Rs. 4.29 lakhs. The Tribunal vacated these demands as not legal. Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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