1. This appeal arises from Order-in-Appeal No. 3/2005 CE dated 12.01.2005. The appellant had been issued with a show cause notice on the ground that they were manufacturing feeding bottles, pet bottles and silicon nipples falling under Chapter Heading 39.23. Silicon nipples manufactured by the appellants are consumed captivity in the manufacturing of feeding bottles which were cleared on payment of duty.
They were also clearing silicon nipples at 'NIL' rate of duty under Notification No. 3/2001 dated 1.3.2001 as amended. As the same was exempted as well as dutiable, they maintained separate raw material accounts for the manufacture of exempted and dutiable silicon nipples.
The allegation is that during the period from April 2000 to November 2002, they did not reverse 8% of the value of the goods as required under Rule 57AD(2) read with Rule 6(3)(b) of Cenvat credit Rules 2002 when they cleared exempted silicon nipples made out of Cenvat credit taken inputs. Their case is that when they maintained separate accounts and when they reversed the Modvat credit availed in respect of the exempted goods, they are not required to reverse 8% of value of goods as claimed by the Revenue. The Revenue has confirmed the duty which is under challenge.
2. I have heard both the sides in the matter. It is pointed out that the CBE&C in their Circular No. 754/701 2003-CX dated 09.10.2003 have clarified that there is no need to take any action in respect of the cases where separate accounts are maintained and credit has been reversed. It is also clarified that Finance Act, 2005, under Sub-section (1) of Section 84 which amends Sub-section (1) of Section 5A of the Central Excise Act, 1944 retrospectively for periods between 21.02.2000 to 28.2.2003, mentions that clearances made under notification issued under Sub-section (1) of Section 5A of Central Excise Act, 1944 are valid. The contention taken by the appellants that the clearance of exempted final products, in dispute period are within the period of valid for clearance under Section 84 of Finance Act, 2005 is well taken proposition and required to be accepted. Further the Sub-section (3) of Section 84 of Finance Act, 2005 states: No recovery shall be made of all such amounts of duty or interest or penalty or fine or other charges which have not been collected or, as the case may be, for which demand notices have been issued under Section 11A or, recovery proceedings have been initiated under Section 11 of the Central Excise Act, as of the amendment made by Sub-section (1), had been in force at all material times.
Therefore the amount at 8% demanded on the price of final products cleared during the period in question is clearly covered under "Other Charges" above and cannot be recovered. They have rightly reversed the inputs credit availed in respect of the exempted goods and hence there is no question of recovery of 8% of the amount. Both the authorities have noted this point and hence, the impugned order cannot be confirmed. The appeal is allowed with consequential relief if any.