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Issues: (i) Whether an amount equal to 8% of the value of exempted acid oil was payable under Rule 6 of the Cenvat Credit Rules, 2002 when the credit taken on sulphuric acid used in the separate process of manufacture of acid oil had been reversed. (ii) Whether the demand relating to goods received for reprocessing was sustainable for alleged improper maintenance of accounts and non-entry in the RG-I register.
Issue (i): Whether an amount equal to 8% of the value of exempted acid oil was payable under Rule 6 of the Cenvat Credit Rules, 2002 when the credit taken on sulphuric acid used in the separate process of manufacture of acid oil had been reversed.
Analysis: Acid oil was produced from soap stock in a process distinct from the manufacture of refined edible oil. The soap stock arose as a by-product in the manufacture of refined oil, and the demand was based on the value of exempted acid oil. The credit availed on sulphuric acid used in the manufacture of acid oil had already been reversed, and on these facts no further amount was found payable under Rule 6.
Conclusion: The demand of 8% of the value of exempted acid oil was not sustainable and the finding was in favour of the assessee.
Issue (ii): Whether the demand relating to goods received for reprocessing was sustainable for alleged improper maintenance of accounts and non-entry in the RG-I register.
Analysis: The records showed that the returned goods had been entered in the RG-I register and the duty credit had been taken back. The requirement of strict one-to-one correlation was found impracticable in a unit with large turnover, and the evidentiary material produced by the assessee supported proper accounting. The matter was therefore rightly remitted for verification of the records.
Conclusion: The demand on this issue was not upheld and the remand direction was sustained in favour of the assessee.
Final Conclusion: The Revenue's appeal failed in full, and the order granting relief on the substantive demand while sustaining the remand on the accounting issue remained undisturbed.
Ratio Decidendi: Where credit attributable to inputs used in a separate process has been reversed and the goods in question arise as a by-product in an exempted stream, Rule 6 cannot be invoked to demand an additional percentage amount merely on the value of the exempted goods; proper accounting of reprocessed returns is to be judged on the records maintained and the practicality of one-to-one correlation.
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