CENVAT credit on exempted clearances: failure to maintain separate input accounts sustained the demand.

Where an assessee clears both dutiable and exempted non-ferrous metal powders without maintaining separate accounts for inputs, liability arises under Rule 6(3)(b) of the CENVAT Credit Rules, 2002, corresponding to Rule 57CC of the Central Excise Rules, 1944. The exemption applied only to clearances to State-funded research institutions under Notification No. 10/97-CE, while other clearances remained dutiable. Payment already made on exempted clearances and recovery from buyers did not defeat the demand, and the differential amount based on the invoice value remained recoverable. The demand was therefore sustained and the appeals failed.

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Issues: Whether the assessee, having cleared both dutiable and exempted non-ferrous metal powders without maintaining separate accounts for inputs, was liable to pay the amount demanded under the applicable credit rules.

Analysis: The goods in question were exempt only for clearances to State-funded research institutions under Notification No. 10/97-CE, while other clearances remained dutiable. Since the assessee manufactured both dutiable and exempted goods and did not maintain separate accounts for inputs, liability arose under Rule 6(3)(b) of the CENVAT Credit Rules, 2002, corresponding to Rule 57CC of the Central Excise Rules, 1944. The assessee had already made payment calculated on the exempted clearances and also recovered the amount from buyers, but the invoice value showed a higher basic value for the exempted goods, making the differential amount recoverable.

Conclusion: The demand was sustainable and the appeals failed.

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