Appellant rectifies exemption error, liable for interest post-withdrawal.

The appellant, initially claiming exemption under Notification No. 48/2008-CE for flood victims, later rectified the error by paying duty and forgoing the exemption benefit. The court set aside the demand under Rule 6 and penalty imposition, but upheld the liability for interest on duty paid post-exemption withdrawal. The judgment emphasizes compliance with exemption conditions and maintaining proper records in excise matters.

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Issues:
1. Availing exemption under Notification No. 48/2008-CE for flood victims.
2. Maintenance of separate input credit records.
3. Liability to pay duty under Rule 6(3) of CENVAT Credit Rules.
4. Imposition of penalty under Rule 15 of CENVAT Credit Rules.
5. Confirmation of interest on duty payment.

Analysis:
1. The appellant, engaged in manufacturing P & P Medicaments, cleared a consignment claiming exemption under Notification No. 48/2008-CE for flood victims, fulfilling all conditions. The Revenue later alleged non-maintenance of separate input credit records, leading to a show-cause notice.

2. The Revenue contended that since the appellant availed the exemption at the time of clearance, they were obligated to pay duty under Rule 6(3) of CENVAT Credit Rules. The appellant, acknowledging the error, paid the duty of Rs. 2,33,277, forsaking the exemption benefit for that clearance.

3. The Judicial Member noted that the appellant irregularly availed the exemption meant for flood victims only once, making separate cenvatable accounts impractical. The appellant, upon realizing the mistake, opted out of the exemption and paid the due duty, disagreeing with the Revenue's insistence on Rule 6(3) application.

4. Consequently, the impugned order confirming the demand under Rule 6 and imposing penalty was set aside. However, the appellant remains liable to pay interest on the duty paid subsequently for clearances under the exemption Notification, as agreed by the appellant's counsel.

5. The judgment concludes by disposing of the appeal, directing the appellant to pay interest on the duty paid post-exemption claim withdrawal, emphasizing the importance of adherence to exemption conditions and proper record-keeping in excise matters.

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