TaxTMI 
TaxTMI 
2007 (4) TMI 84
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....of 'Slice' cleared during the period 1-11-03 to 30-9-04 in terms of Rule 6(3)(b) of Cenvat Credit Rules, 2002 (CCR' 02 for short) as the assessee had used the input plastic crates in the manufacture of both dutiable and exempted goods and did not maintain separate accounts of such inputs for such use, as prescribed. In conclusion of the proceedings, the Commissioner demanded an amount of Rs. 1,25,69,549/- from PIHPL under Rule 12 of Cenvat Credit Rules, 2002 read with Section 11A of the Central Excise Act, 1944 (the Act) along with appropriate interest. He also imposed a penalty of Rs. 12 lakhs on the assessee under Rule 13 of the CCR, 2002. 2. The proposals in the notice were confirmed and decided against the assessee for the reason that the assessee had not maintained separate accounts of receipt, consumption and inventory of plastic crates used for packing Slice' and aerated drinks cleared during the material period. The Commissioner did not dispute the claim made by the assessee that they had not used new plastic crates for packing 'Slice'. He did not find the plea of the assessee that the 'inputs' envisaged in the Cenvat Credit Rules '02 were only those received in the fact....
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....maintained in relation to receipt, consumption and inventory of only common inputs on which Cenvat credit was available and which were meant for use in the manufacture of dutiable goods and exempted goods. Once the new crates had entered the manufacturing stream and the crates had been used once, the provisions of Rule 6 ceased to operate as regards those inputs. Therefore, provisions Rule 6(3)(b) of Cenvat Credit Rules, 2002 did not apply as regards used crates and hence the impugned order was not sustainable. 4. In the appeal, the appellants have submitted that when 'Slice' was exempted from payment of duty with effect from 1-3-2001, they had filed a declaration with the department informing that they were maintaining separate accounts for common inputs used in the manufacture of 'Slice'. They had also intimated the department vide their letter dated 24-8-2001, that they used only old crates for packing 'Slice'. The appellants had also informed the Range Superintendent that they had not taken Cenvat credit on 22% of new crates purchased in the year 2000. In reply to the Show Cause Notice, the appellants had submitted that during the material period new crates had been received....
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.... no further credit could be availed on such goods. The requirement of maintaining separate account ceases once the inputs have been accounted as issued for consumption. We find considerable force in the argument of the appellants that used plastic crates are not subject to the rules regulating the use of common inputs. It is not the case of the department that appellants have used new crates for clearing ex empted final products. Therefore, they have not violated the provisions of Rule 6(3)(b) of the Cenvat Credit Rules, 2002 to attract the liability applicable to common inputs used in exempted and dutiable final products. Therefore, the demand made on the appellants on the premise that they are required to maintain separate accounts as regards the entire plastic crates in use by the appellants is incorrect. Rule 6 of CCR, 02 reads as under: 6. Obligation of manufacturer of dutiable and exempted goods. (1) The CENVAT credit shall not be allowed on such quantity of inputs which is used in the manufacture of exempted goods, except in the circumstances mentioned in sub-rule (2). (2) Where a manufacturer avails of CENVAT credit in respect of any inputs, except inputs intended ....
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.... followed Rule 6(2) of the CCR, 2002 and had not maintained separate accounts of receipt, consumption and inventory of used crates deployed for packing dutiable and exempted final products manufactured and cleared by the appellants. There is no dispute that the appellants had not taken credit of duty paid on 22% of the crates which is the percentage of 'Slice' out of the assessee's total production. It is also not in dispute that the appellants had not used new crates for packing 'Slice' in the material period. Since the appellants used inputs in the manufacture of exempted and dutiable final products, unless they had followed the provisions of Rule 6 of CCR, 2002, they were required to pay 8% (10% from 10-9-2004) of the sale price of the exempted final product (slice) cleared during the material period. The appellants have argued that when the used crates received back in the factory from distributors of the products of the appellants, they are not covered by any duty paying documents and are there fore, not inputs in terms of Rule 2(g) of CCR, 2002. The provisions of Rule 6(2) and 6(3) of CCR, 2002 applied only to inputs received under cover of prescribed duty paying documents an....
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....FO) was not covered by Rule 6(2) of CCR, 2004 till issue of Notification No. 27/2005-C.E. (N.T.), dated 16-5-2005. The Notification amended Rule 6(2) of CCR, 2004 by bringing inputs used as fuel also under the coverage of Rule 6(2) of CCR, 2004. The appellants had reversed an amount of Rs. 4,97,596/- being the Cenvat credit availed on furnace oil from 16- 5-2005 in 9/2005. The amount demanded was computed as 10% of the sale price of the exempted 'Slice' cleared by the assessee from 1-10-2004 to 30-9-2005. 10. The assessee has not maintained separate accounts as regards receipt, consumption and stock of the common input FO used in the manufacture of dutiable and exempted final products manufactured and cleared by the assessee during the material period. Therefore, the impugned clearances attract the provisions of Rule 6(3)(b) of Cenvat Credit Rules, 2004. We note that in addition to the inclusion of fuels like FO under inputs in Rule 6(2), the amount to be paid in terms of Rule 6(3)(b) of CCR, 2004 has been enhanced to 10% from the erstwhile 8% of the sale price of the exempted goods from 10-0-2005. 11. We note that by the time the subject show cause notice was issued, the rel....
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.... 16-10-2001 issued by the Board wherein it was clarified that in cases where common inputs are used in the manufacture of exempted and dutiable final products, and the assessee does not maintain separate accounts as prescribed or does not pay 8% of the price of the exempted goods, credit taken on inputs that had gone into the manufacture of exempted final products may be recovered. Their contention was that their case was covered by the said Circular issued by the Board. 13. The learned JCDR, on the other hand relied on the judgment of the Hon'ble Supreme Court in the case of M/s. Amrit Paper v. CCE, Ludhiana [2006 (200) E.L.T. 365 (S.C.) = 2006 -TIOL-85-SC-CX] wherein it was held as under: "57C. Credit of duty not to be allowed if final products are exempt. - No credit of the specified duty paid on the inputs used in the manufacture of a final product (other than those cleared either to a unit in a Free Trade Zone or to a hundred per cent Export-Oriented Unit) shall be allowed if the final product is exempt from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty." It provides in mandatory and categorical terms that no credit of the sp....