Rule 6 demand and appeal authorisation fail where separate accounts were maintained and review approval was invalidly signed.

A departmental appeal was treated as not maintainable because the review order authorising the appeal was not validly signed by the competent Chief Commissioners, making the authorisation defect fatal. On the substantive issue, the Tribunal stated that where the assessee maintained separate accounts, informed the department in advance about input use, and did not take credit on inputs attributable to exempted goods, mere absence of separate physical storage did not justify a demand under Rule 6 for 8% of the value of exempted goods. The demand was therefore held unsustainable and the assessee obtained relief.

---

---

Issues: (i) Whether the Department's appeal was maintainable when the review order authorising the appeal had not been validly signed by the competent authority; (ii) whether, in respect of common inputs used for dutiable, exempted and export goods, the assessee was liable to pay 8% of the value of exempted goods for not maintaining separate storage of inputs despite maintaining separate accounts and not availing credit on inputs for non-dutiable goods.

Issue (i): Whether the Department's appeal was maintainable when the review order authorising the appeal had not been validly signed by the competent authority.

Analysis: The appeal was held to be liable for dismissal at the threshold because the review order authorising filing of the appeal was not signed by the Chief Commissioners appointed by gazette notification as required by law. The Tribunal treated this defect as fatal to the Department's appeal in light of its earlier decisions on the same point.

Conclusion: The Department's appeal was not maintainable and stood dismissed.

Issue (ii): Whether, in respect of common inputs used for dutiable, exempted and export goods, the assessee was liable to pay 8% of the value of exempted goods for not maintaining separate storage of inputs despite maintaining separate accounts and not availing credit on inputs for non-dutiable goods.

Analysis: The assessee had maintained separate accounts, intimated the department in advance about the proportion of inputs to be used for dutiable goods, and had not taken credit on inputs used for exempted goods. The controversy was confined to absence of separate inventory storage. The Tribunal found that the demand was inconsistent with the factual position and with subsequent departmental orders, and that the assessee had not challenged the stated input-utilisation percentage. The Tribunal also noted that credit admissible on export goods had not been availed by the assessee.

Conclusion: The demand under Rule 6 was not sustainable and the assessee was not liable to pay 8% of the value of the exempted goods.

Final Conclusion: The order confirming the demand was set aside and the assessee obtained relief on the substantive dispute, while the Department's appeal was dismissed for want of valid authorisation.

Ratio Decidendi: Where an assessee maintains separate accounts and does not take credit on inputs attributable to exempted goods, mere absence of separate physical storage of inputs does not justify a demand under Rule 6.

---