Rule 6(3)(i) applied: 5-6% Cenvat demand for exempt limestone stock transfers upheld; extended period set aside, penalties waived

CESTAT, Chennai (AT) upheld a demand under Rule 6(3)(i) of the Cenvat Credit Rules for payment of 5%/6% of the value of exempt stock transfers (limestone) because the appellant failed to maintain separate accounts or exercise the option under Rule 6(3); duty and interest for the normal period were confirmed. The tribunal set aside invocation of the extended period and entirely waived penalties, finding no suppression and that returns/accounts disclosed the transfers; appeal partly allowed with duty plus interest payable for the normal period only.

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Issues Involved:
1. Whether the limestone stock transferred to other plants is an exempted final product.
2. Whether the appellant is required to maintain separate accounts for common inputs/input services used for exempted and dutiable products.
3. Applicability of Rule 6(3) of the Cenvat Credit Rules, 2004.
4. Limitation and penalties.

Summary:

Issue 1: Exempted Final Product
The appellant argued that limestone is a raw material for cement and not a final product. The department contended that limestone, being chargeable to 'Nil' rate of duty, is an exempted final product as per Rule 2(d) of the Cenvat Credit Rules. The Tribunal held that limestone stock transferred to other units is an exempted final product.

Issue 2: Maintenance of Separate Accounts
The appellant did not maintain separate accounts for common inputs/input services used for dutiable and exempted products. The Tribunal noted that under Rule 6(2) of the Cenvat Credit Rules, the manufacturer must maintain separate accounts for inputs/input services used for exempted goods. The Tribunal found that the appellant failed to comply with this requirement.

Issue 3: Applicability of Rule 6(3)
The appellant argued that Rule 6(3) requires the production of two final products, one dutiable and one exempted. The Tribunal rejected this argument, stating that the appellant manufactures Cement/Clinker (dutiable) and limestone (exempted), thus meeting the conditions of Rule 6(3). The demand raised under Rule 6(3)(i) was found to be legal and proper.

Issue 4: Limitation and Penalties
The appellant contended that the demand is time-barred and penalties are unwarranted. The Tribunal agreed that there was no suppression of facts and that the issue is interpretational. Therefore, the extended period for demand was not justified, and penalties were set aside. The appellant is liable to pay duty along with interest for the normal period only.

Conclusion:
The Tribunal upheld the demand and interest for the normal period but set aside the penalties. The appeal was partly allowed with consequential reliefs.

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