Hunsur Plywood Works Pvt. Ltd vs Commissioner Of Central Excise, ...

[Arising out of Order-In-Appeal No. 23/2012 dated 12/01/2012 passed by the Commissioner of Central Excise, Mangalore]

For approval and signature:

HON'BLE SHRI B.S.V. MURTHY, TECHNICAL MEMBER

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3 Whether Their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes

Hunsur Plywood Works Pvt. Ltd. Post Box No.2, B.M. Road, Hunsur - 571 105 Appellant(s)

Versus Commissioner of Central Excise, Customs and Service Tax, Mysore S1-S2, Vinaya Marga, Siddhartha Nagar, Mysore  570 011 Karnataka Respondent(s)

Appearance:

Mr. M.S. Nagaraja, Advocate T. Rajeswara Sastry & Associates.

# 48, 11th Main, Banashankari, 2nd Stage, Bangalore  560 070 Karnataka For the Appellant

Mr. N. Jagdish, AR For the Respondent

Date of Hearing: 23/01/2015 Date of Decision: 23/01/2015 CORAM:

HON'BLE SHRI B.S.V. MURTHY, TECHNICAL MEMBER

Final Order No. 20123 / 2015

Per: B.S.V. MURTHY

Appellant is engaged in the manufacture of plywood. During the course of manufacture of plywood saw dust, wood waste, scrap etc. emerged. These are sold by the appellants for use as firewood or whatever purpose the customers want. Taking a view that such items emerging during the course of manufacture of plywood and sold by the appellant are excisable goods and since no duty is paid, it has to be held that the appellant is manufacturing exempted goods and dutiable goods. Since the appellant had not maintained separate accounts for inputs and input services, demand has been confirmed requiring the appellant to pay the amount as prescribed under Rule 6(3) of Cenvat Credit Rules 2004 with interest. Mandatory penalty also has been imposed.

2. Learned counsel submits that the waste, scrap or dust etc. which arise during the course of manufacture of plywood cannot be considered as final products at all but have to be treated as waste or at best by-products. He submits that in the case of Rallis India Ltd. Vs. Union of India [2009 (233) E.L.T. 301 (Bom.)] and in the case of Union of India Vs. Hindustan Zinc Ltd. [2014 (303) E.L.T. 321 (S.C)] it was held that where by-products waste or scrap emerge during the course of manufacture, emergence of such product cannot be considered as manufacture of final products comprising of exempted goods. He draws my attention to paragraphs 26 & 27 of the decision of the Honble High Court in the case of Hindustan Zinc Ltd. The said paragraphs are reproduced below for better appreciation:

26. Furthermore, the provisions of Rule 57CC cannot be read in isolation. In order to understand the scheme of Modvat credit contained in this Rule, a combined reading of Rules 57A, 57B and 57D along with Rule 57CC becomes inevitable. We have already reproduced Rule 57D above. It can be easily discerned from a combined reading of the aforesaid provisions that the terms used are inputs, final products, by-product, waste products, etc. We are of the opinion that these terms have been used taking into account commercial reality in trade. In that context when we scan through Rule 57CC, reference to final product being manufactured with the same common inputs becomes understandable. This Rule did not talk about emergence of final product and a by-product and still said that Rule 57CC will apply. The appellant seeks to apply Rule 57CC when Rule 57D does not talk about application of Rule 57CC to final product and by-product when the by-product emerged as a technological necessity. Accepting the argument of the appellant would amount to equating by-product and final product thereby obliterating the difference though recognised by the legislation itself. Significantly this interpretation by the Tribunal in Sterlite (supra) was not appealed against by the department.

27. We are also unable to agree with the submission of the learned Secretary General that judgment in GAILs case is not applicable. Significantly, the question as to whether Rule 57CC will apply when by-products are cleared without payment of duty came for discussion in that case. It was held that so long as the lean gas was obtained as a by-product and not as a final product, Rule 57CC will not apply. We are, therefore, of the view that the respondents case is squarely covered by the judgment in GAILs case.

3. I find that the issue is squarely covered by the decision relied upon by the learned counsel. Accordingly the appeal is allowed with consequential relief, if any, to the appellant.

(Order pronounced and dictated in open court)

(B.S.V. MURTHY) TECHNICAL MEMBER

iss