2015 (10) TMI 107 - AT - Central Excise

Tribunal remands case for compliance verification of separate accounts for dutiable and exempted goods

The Tribunal remanded the case to the original adjudicating authority to verify if the appellant complied with Rule 6(2) of CENVAT Credit Rules by ... Denial of CENVAT Credit - Non maintenance of separate accounts - whether the appellant has maintained separate accounts as required under Rule 6(2) of CENVAT Credits Rules 2004 - Held that:- matter deserves to be remanded to the original adjudicating authority who is to verify the submissions of the appellant that they were maintaining separate accounts in terms of Rule 6(2) of CENVAT Credit Rules and liability of payment of duty under Rule 6(3) of CENVAT Credit Rules does not arise against them. It is made clear here that till the verification is made and fresh decision is arrived at by the original adjudicating authority, there will not be any change in respect of the status of the predeposit made by the appellant in terms of the CESTAT, Bangalore. - Appeal disposed of. Issues:1. Obligation under Rule 6(2) of CENVAT Credit Rules, 2004 regarding maintaining separate accounts for dutiable and exempted goods.2. Dispute over whether the appellant maintained separate accounts as per Rule 6(2).3. Interpretation of Rule 6(3) of CENVAT Credit Rules regarding payment of duty for non-compliance with Rule 6(2).Analysis:Issue 1: Obligation under Rule 6(2) of CENVAT Credit Rules:The case involved the obligation under Rule 6(2) of CENVAT Credit Rules, 2004 on the manufacturer assessee producing both dutiable and exempted goods. The appellant, in this case, manufactured both dutiable items like paper tags, labels, and paper cartons, as well as non-dutiable goods such as brochures and catalogues attracting nil rate of duty. The Department contended that the appellant was required to maintain separate accounts for dutiable and exempted goods as per Rule 6(2).Issue 2: Dispute over maintaining separate accounts:The appellant argued that they had indeed maintained separate accounts for dutiable goods, which the Department failed to verify adequately. The appellant referred to a decision of CESTAT in a similar case to support their contention that their method of maintaining accounts fulfilled the requirements of Rule 6(2). The Commissioner argued that the appellant did not comply with Rule 6(2) and should pay 10% of the value of exempted goods as Central Excise duty.Issue 3: Interpretation of Rule 6(3) for non-compliance:The dispute centered around the interpretation of Rule 6(3) of CENVAT Credit Rules, which mandates payment of duty if separate accounts are not maintained as per Rule 6(2). The Commissioner cited a decision by CESTAT, Mumbai, upheld by the High Court, to support the imposition of duty for non-compliance. The appellant contended that their procurement of raw materials from the open market, not eligible for CENVAT credit, was sufficient for manufacturing exempted goods, thus challenging the duty demand.In the judgment, the Tribunal remanded the matter to the original adjudicating authority to verify whether the appellant had maintained separate accounts as required by Rule 6(2). The Tribunal emphasized the need for verification and fresh decision by the authority, maintaining the status quo of the predeposit made by the appellant. The appellant was granted the opportunity to present facts and evidence, with a directive to cooperate fully with the Department during the verification process. The appeal was disposed of by way of remand for further adjudication.