P. KARTHIKEYAN, MEMBER (TECHNICAL)

When the case is called nobody appeared for the appellants. The appeal is taken up for disposal. In the impugned order the Commissioner (Appeals) had sustained a demand of Rs. 31,844/- being 8% of the sale price of the exempted final products cleared by the appellants during the material time and a penalty of equal amount under Section 11 AC read with Rule 173Q/Rule 25 of the Central Excise No. (2) Rules, 2001.

2. The facts of the case are that during the years 2000-2001 and 2001-2002, M/s. Nirmal Industries, the respondents herein had manufactured and cleared final products Electric storage water heaters and Solar water heaters bearing Nirmal brand and such goods bearing V-guard brand belonging to another person. The final products bearing V-guard brand were cleared on payment of duty. In respect of the Nirmal brand products, the respondents availed SSI exemption under Notifications No. 8/2000-CE and 8/2001-CE. As the respondents were found to have used common inputs without maintaining separate accounts as regards their receipt, consumption and inventory, proceedings were initiated as per Central Excise Rules. On conclusion of the proceedings, the original authority demanded an amount of Rs. 31,844/- in terms of Section 11A of the Central Excise Act,1944 read with Rule 6 (3)(b) of the Cenvat Credit Rules,2001, Rule 57AD (2)(b) and 57I of the Central Excise Rules,1944. An amount equal to 8% of the sale price charged by the respondents for sale of Nirmal brand products was demanded. A penalty equal to the said amount was also imposed under Section 11AC of the Central Excise Act, 1944 read with Rule 173Q of Central Excise Act,1944 and Rule 25 of the Central Excise No. (2) Rules, 2001. Interest due also was demanded.

3. In the impugned order the Commissioner (Appeals) found that the appellant before him had failed to establish that it had maintained separate accounts as regards receipt, consumption and inventory of common inputs used in the manufacture of dutiable and exempted final products. Accordingly, he upheld the order of the original authority.

4. In the appeal before the Tribunal, it is submitted that the respondents had stored the inputs used for dutiable goods and exempted goods separately. The demand was not sustainable as the same was made under Section 11A. They had maintained necessary records. Owing to heavy competition, the respondents could not employ sufficient personnel to maintain the records as required. They had not used duty paid inputs in the production of exempted final products.

5. In a letter dated 24.10.07, the appellant has submitted that records could not be maintained as required owing to paucity of staff. He prayed for a lenient disposal of the case.

6. I have carefully considered the facts of the case. The appellant has not established that he had followed the procedure prescribed in Rule 6 (3) of the CCR, 2001. Commissioner (Appeals) found that the appellant kept invoices relating to purchase of goods for the two streams but did not maintain separate accounts as required under erstwhile Rule 57AD of CER/Rule 6(3) of Cenvat Credit Rules,2001(CCR). The respondents have not advanced any evidence to controvert the finding of the Commissioner (Appeals) that they had not maintained separate accounts of common inputs as required under the provisions of erstwhile Rule 57AD of CER or, Rule 6 (3)(b) of CCR with effect from 21.06.01. As the respondents had failed to maintain separate accounts, they have to pay an amount equal to the 8% of the price of the exempted final products in terms of Rule 57AD (2)(b) and 57I of the C E R and, from 26.02.01 in terms of Rule 6(3)(b) of CCR,2001. Therefore, the demand of Rs. 31,844/- is in accordance with law. The demand has been confirmed under appropriate provisions even though Section 11 A also has been mentioned. Accordingly, the demand of Rs. 31,844/- is sustained.

7. As regards the penalty, I find that equal amount is a little too harsh and is not warranted. The penalty is reduced to Rs. 5000/-. The appeal is disposed off.