Commissioner Of Central Excise vs Tulsyan Nec Ltd

[Arising out of Order-in-Appeal No.58/2006 (M-II) dated 31.7.2006 passed by the Commissioner of Central Excise (Appeals), Chennai-II]

Commissioner of Central Excise, Chennai-II Appellant

Versus

Tulsyan NEC Ltd. Respondent

Appearance:

Shri K.P. Muralidharan, AC (AR) For the Appellant Smt. Kamna Shrikanth, Advocate For the Respondent

CORAM:

Honble Shri R. Periasami, Technical Member

Date of hearing : 19-01-2015 Date of decision : 19-01-2015

FINAL ORDER No.40053/2015

Revenue filed appeal against the order of Commissioner (Appeals) dt. 31.7.2006.

2. The brief facts of the case are that the respondents manufactured CTD bars and cleared the same on payment of Central Excise duty. They also undertook conversion of ingots into CTD bars on job work basis and cleared the same under Rule 57F (4) challan. They have availed input credit on furnace oil and oxygen as fuel. Show cause notice dt. 28.7.2005 was issued to the respondent demanding reversal of input credit availed on fuel used in the manufacture and clearance of exempted under Rule 6(2) of CCR. The adjudicating authority in order dt. 21.12.2005 confirmed the demand of Rs.24,44,678/- equivalent to 8% of value and also imposed equivalent penalty. On appeal by the appellants, the lower appellate authority in the impugned order set aside the order and allowed their appeal. The Revenue preferred the present appeal.

2. Heard both sides.

3. The Ld. AR on behalf of the Revenue reiterates the finding of the adjudication order. He submits that respondents are required to reverse the proportionate credit on the fuel used in the exempted product. Since they have not maintained separate accounts for dutiable and exempted products and also they have not reversed proportionate amount, the adjudicating authority has rightly demanded 8% of value of clearance under Rule 6. Further, he submits that Commissioner (Appeals) has not followed the Larger Bench decision in the case of Kirloskar Oil Engines Ltd. Vs CCE Pune  1994 (73) ELT 835 (Tri.). He further submits that by virtue of retrospective amendment from September 2010, the respondents are required to reverse proportionate amount on the exempted goods. He relied on the following citations :-

(1) CCE Salem Vs Burn Standard Co. Ltd.

2013 (295) ELT 677 (Mad.)

(2) Hind Lamps Ltd. Vs CCE Kanpur 2010 (250) ELT 247 (Tri.-Del.)

4. On the other hand, learned advocate appearing for the respondent reiterated the OIA. She submits that during the relevant period, CCR 2002 is applicable as per Rule 6 (2) of CCR credit availed on the fuel is excluded from the provisions of Rule 6 (1) of CCR. The Commissioner (Appeals) has rightly allowed their appeal as they are not required to reverse credit on the fuel used in the exempted product. The amendment in Rule (6) of CCR came into effect from 16.5.2005 where the word input credit on fuel has been deleted. She further submits that as the period involved in this case is from April 2002 to March 2005, they are rightly eligible to avail credit on fuel as per Rule 6 (2) of CCR 2002 and Rule 6 (2) of CCR 2004 prior to the amendment. She relied on the following citations.

(1) CCE Tirunelveli Vs Sudarsanam Spinning Mills 2004 (166) ELT 461 (Tri.-Chennai) (2) Commissioner Vs Shell Extruders 2009 (233) ELT A63 (Guj.) (3) Commissioner Vs Sudarsanam Spinning Mills 2014 (300) ELT A13 (Mad.)

5. I have carefully examined both the submissions and perused the records. The short issue to be decided in this appeal is whether respondents are required to reverse the input credit availed on fuel used in the manufacture of exempted products as they manufactured both dutiable and exempted goods and availed input credit on fuel. The period involved in this case relates to April 2002 to March 2005 and the relevant provisions of CCR applicable during the period is CCR 2002 and CCR 2004. The rule 6 (1) and 6(2) of Rule 2002 existed during the material are reproduced as under :-

Rule 6 (1) :-

"(1) The CENVAT credit shall not be allowed on such quantity of inputs which is used in the manufacture of exempted goods, except in the circumstances mentioned in sub-rule (2)."

Rule 6(2) :-

"Where a manufacturer avails of CENVAT credit in respect of any inputs, except inputs intended to be used as fuel, and manufactures such final products which are chargeable to duty as well as exempted goods, then, the manufacturer shall maintain separate accounts for receipt, consumption and inventory of inputs meant for use in the manufacture of dutiable, final products and the quantity of inputs meant for use in the manufacture of exempted goods and take CENVAT credit only on that quantity of inputs which is intended for use in the manufacture of dutiable goods."

6. The same continued in Rule 6 (2) of 2004 also. The Rule 6 (1) stipulates for inputs are used for dutiable and exempted goods and sub-rule (2) of CCR stipulates that respondents should maintain separate inventory of inputs exempted and dutiable except intended to be used as fuel. The present case is only on the credit availed on fuel used in the exempted product. The issue has already been settled by various High Courts and the Tribunal. The Hon'ble High Court of Madras in the case of Commissioner Vs Sudarshan Spinning Mills (supra) upheld the Tribunal's order allowing credit on fuel and rejected the Revenue's appeal. The relevant portion of the said order is reproduced as under:-

"In this Civil Miscellaneous Appeal, the following Substantial Question of Law is raised for consideration :

"Whether the CESTAT is right in allowing modvat credit of duty paid on inputs Furnace Oil/LSHS used in the manufacture of exempted final products."

2. It is now brought to the notice of this Court that the issue involved in this appeal is covered against the Revenue by the judgmenet of this court is CMA No.3442 of 2005, dated 28-4-2009 (The Commissioner of Central Excise, Turunelveli v. M/s.Rajapalayam Mills Ltd., Rajapalayam & Another). Following the above said judgment, the question of law is answered against the Revenue and the appeal is dismissed. No costs."

7. The Hon'ble High Court of Gujarat in case of Commissioner Vs Shell Extruders (supra) also dismissed the Revenue's appeal on the issue. In the present case, the lower appellate authority has discussed the issue in detail and rightly held that credit availed on furnace oil and oxygen which are fuel is permissible. By respectfully following the Hon'ble High Court order and the Tribunal's decision, I do not see any infirmity in the order of Commissioner (Appeals). Accordingly, I uphold the impugned order and dismiss the Revenue's appeal.

(Dictated and pronounced in open court)

(R. PERIASAMI) TECHNICAL MEMBER

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