TaxTMI 
TaxTMI 
2005 (11) TMI 120
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....rty two lakhs eighty five thousand eight hundred and fifty only) issued vide show cause notice dated 31-12-97 on the point of time bar by holding that the extended period of five years in terms of proviso to Section 11A of the Central Excise Act, 1944 is not applicable. The assessee has filed the appeal against the other portion of the impugned order vide which demand of duty of Rs. 91,236/- (Rupees ninety one thousand two hundred thirty six only) and Rs. 68,116/- (Rupees sixty eight thousand one hundred and sixteen only) and Rs. 2,25,598/- (Rupees two lakhs twenty five thousand five hundred ninety eight only) stands confirmed against them along with imposition of personal penalty of Rs. 1 lakh and Rs. 3 lakhs under the provisions of Rule 173Q. Other appeals are against the imposition of personal penalties of Rs. 50,000/-, Rs. 40,000/-, Rs. 10,000/- and Rs. 10,000/- imposed upon Shri Rakesh Shah, Shri N.K. Doshi, Shri V.K. Patel and Shri B.L. Dhabi, respectively. 2. We have heard Shri Uday Joshi, ld. Advocate, appearing for the revenue and Shri G.N.Srinivasan, ld. Advocate, appearing for the assessee. 3. As per facts on record, the appellants are engaged in the manufacture of....
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....ropping of demand on limitation point. 5. There is no dispute on the merits. Admittedly, the appellants are reversing credit proportionate to that quantity of the inputs, which are actually contained in the exempted final products and not on full quantum of inputs, which are otherwise required or actually issued for the manufacture of the said exempted final products. To elaborate a little on the said issue; if the 100 units of raw materials are required for manufacture of the final products and only 97 units are actually contained in the final products with 3 units resulting in emergence of waste and scrap, etc. the appellants have reversed credit only in respect of 97 units and not in respect of 100 units. The Commissioner has held that the assessee was required to debit the credit in respect of the entire 100 units. We do not find any fault in the above findings of the Commissioner. Under the provisions of modvat rules an assessee is required to maintain two separate accounts of inputs used in the manufacture of dutiable and exempted final products. It is only by way of concession that an assessee is first allowed to take credit in respect of all the common inputs and subsequ....
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....l products, irrespective of waste and scrap so generated, dutiable or otherwise, the only logical conclusion is that the entire credit is to be reversed where inputs are used for manufacture of exempted "final products" irrespective of the fact, whether waste and scrap or by-product generated are dutiable or otherwise. It could not be assessees case that waste and scrap are "final products". These may be definitely called "goods" as these are sold and purchased in the market, but these are definitely not final products but merely unintentional by-products which arise during the course of manufacture of the final products. The dutiability or otherwise of such waste scrap is not at all relevant for the purpose of applying the bar on availment of modvat credit on inputs which are used in the manufacture of final products, under the provisions of Rule 57C of the Central Excise Rules 1944. Moreover, the emphatic, clear and unambiguous language used in Rule 57C clearly enjoins that no credit of duty paid on inputs shall be allowed, if such inputs are used in the manufacture of exempted final products, except 4 situations of clearance of such exempted final products to a unit in a Free Tr....
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....inputs content theory" in respect of exempted final products." 6. However, as regards limitation, the Commissioner has dropped the demand on the ground that cross examination of the three concerned officers of the revenue has reflected that the fact of proportional reversal was known to the jurisdictional Central Excise Officers and the notices have also filed a classification list for payment of duty on the dutiable plastic scrap and this was mentioned in RT-12 returns. He has also referred to certain show cause notices issued in the year February 96 demanding duty on the inputs used in the exempted final products and has concluded that there was a genuine doubt and confusion on the part of the departmental officers regarding interpretation of Rule 57C. However, we find that while extending the benefit of limitation to the assessee, the Commissioner has merely referred to cross examination of the officer without actually detailing the contents of the such cross examination. It is also not on record as to whether knowledge, if any, on the part of these officers, was in their personal capacity or as a revenue officer. It has also not been disclosed as to what were the basis of....