PALIWAL GHLASS WORKS Vs. UNION OF INDIA

JUDGEMENT

(1.) Heard Shri Rahul Agarwal, learned counsel for the petitioner and Shri S.P. Kesarwani, learned counsel appearing for the respondents.

(2.) Brief facts of the case as emerge from the pleadings of the parties are:The petitioner was manufacturing glass and glassware. The raw material used by the petitioner in its process of manufacture was cullet and other waste scrap of glass, soda ash etc. The petitioner was availing Modvat Credit facility in respect of various inputs. The final products manufactured by the petitioner were both dutiable as well as exempt products, manufactured in the same assembly line using the same inputs. Since it was not possible to segregate the amount of inputs used in the manufacture of exempted as well as dutiable products, the petitioner used a ratio of total manufacture of exempted final product and dutiable final product to the total input used to determine how much of input was being used in the manufacture of exempted product and how much of input was being used in the manufacture of duitable product. That the petitioner had been declaring the same in its books as well as its return filed with the Central Excise Department. The Department had been accepting the same. That on scrutiny of quarterly RT12 return filed by the petitioner for the period December 1997 to August 1998, it was observed by the Central Excise Officer that the petitioner had availed Modvat Credit in respect of inputs such as cullet and other waste of glass falling under Tariff Heading 7001.10 and used the same in the manufacture of exempted final products as well as duitable final products. It was also noticed that the petitioner had been reversing the Modvat Credit utilized on the total inputs on a prorata basis depending the weight of duitable and exempted final products. The petitioner had therefore, reversed a total amount of Rs.5,473/- of Modvat Credit out of total Rs.40,045/- credit availed, being the Modvat Credit arising out of the use of inputs in exempted final products. However, separate accounts as envisaged under Rule 57CC of the Central Excise Rules, 1944 were not maintained. Due to non-maintenance of segregating accounts a show cause notice was issued to the petitioner on 23/9/1998. According to the show cause notice, the petitioner was liable to reverse Rs.9,28,815/- as the duty payable. The above demand was confirmed by order dated 24/2/2000, passed by the Deputy Commissioner, Central Excise, Agra and a penalty of Rs. 1 lac was also imposed. The petitioner filed a time barred appeal before the Commissioner of Central Excise (Appeals) Kanpur which was rejected on 19/1/2006. Against the aforesaid order, the petitioner preferred a second appeal before the CESTAT, New Delhi which was registered as Appeal No.2828/2009. Petitioner deposited the amount to satisfy the aforesaid demand.

(3.) By Finance Act, 1910 (hereinafter called the ("Act,1910") Central Excise Rules, 1944 (hereinafter called the ("Rules,1944") were amended by inserting new Rule 57CCC. Rule 57CCC provides as under: