Per : S.S. Kang Heard both sides.
2. Applicant filed this application for waiver pre-deposit of duty of Rs.59,79,635/-, interest and penalty. The demand is confirmed on the ground that the applicants are availing input credit in respect of the common inputs used in the manufacture of dutiable as well as exempted goods and are not maintaining separate records. Hence, the applicants are liable 10%/5% of the price of exempted goods as per the provisions of Rule 6 of CENVAT Credit Rules.
3. The contention of applicant is that the applicants are maintaining separate records by way of separate purchase register for items on which credit is availed and in respect of the items on whichCENVAT credit has not been availed. Therefore, it cannot be said that applicant has not maintaining separate records or applicant had availed credit on common inputs used in the manufacture of dutiable as well as exempted goods. It is also submitted by the applicant that the finished goods were cleared at nil rate of duty by availing benefit of Notification No. 64/95-CE. Notification No. 64/95-CE which provides exemption from payment of Central Excise duty in respect of the goods which were supplied and used for system and sub-system of project Astra of the Government of India, Ministry of Defence. The contention is that as per the provisions of Rule 6 (3) (a) (vii) (4) of the CENVAT Credit Rules provides that in case goods were cleared under benefit of Notification No. 64/95-CE. The manufacturer is liable to pay an amount equivalent to the CENVAT Credit attributable to the inputs and input services used in, or in relation to the manufacture of such final product at the time of their clearance from the factory. The contention is that as the goods were cleared under benefit of Notification No. 64/95-CE. Therefore, the applicant is liable to reverse the credit only and as the applicants had not availed the credit therefore the demand is not sustainable.
4. Revenue reiterate the finding of the lower authority to submit that as per the provisions of Rule 6 of CENVAT Credit Rules, as applicants were availing input credit on credit in respect of common inputs used in or in relation to the manufacture of dutiable as well as exempted goods. Hence applicant is liable to pay 10%/5% of the price of the final product cleared at nil rate of duty.
5. We find that applicant in reply to the show cause notice specifically mentioned that applicants are maintaining a separate records regarding inputs on which credit has been availed and the inputs regarding which no credit has been availed by way of separate register and this facts is noticed by the adjudicating authority in Para 11 of the impugned order. While passing the impugned order, the adjudicating authority has not taken into consideration this fact while confirming the demand.
6. Further, we find that as per the provisions of Rule 6 (3) (a) (vii) (4) of the CENVAT Credit Rules, in case the goods were cleared by availing the benefit under Notification No. 64/95-CE the manufacturer is only liable to reverse the credit attributable to the input and inputs services used in or in relation to the manufacture of such final products at the time to clearance from the factory. This aspect has also not been taken into consideration while confirming the demand. In view of this, we find that the matter requires re-consideration by the adjudicating authority the impugned order is set aside, after waiving the pre-deposit of duty, interest and penalty. The matter is remanded to the adjudicating authority to decide afresh after affording an opportunity of hearing to the appellant. Appeal is disposed of by way of remand. (Dictated in court) (Sahab Singh) Member (Technical) (S.S. Kang) Vice President
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