M/S. Isibars Limited vs Commissioner Of Central Excise, Raigad

[Arising out of Order-in- Appeal No. AT/M-III/141/2004 dtd. 25/10/2004 passed by the Commissioner of Central Excise (Appeals) Mumbai-III]

For approval and signature:

Honble Mr. PK. Jain, Member(Technical) Honble Mr Ramesh Nair, Member(Judicial)

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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : seen of the Order?

4. Whether Order is to be circulated to the Departmental: Yes authorities? =======================================================

M/s. ISIBARS Limited : Appellants

VS

Commissioner of Central Excise, Raigad. : Respondent

Appearance

Ms. Sonali Salaskar, alongwith Ms. Ruju, Thakkar, Ld. Counsel for the Appellants Shri. V.K. Shastri, Asst. Commissioner(A.R.) for the Respondent

CORAM:

Honble Mr. PK. Jain, Member (Technical) Honble Mr. Ramesh Nair, Member (Judicial)

Date of hearing: 31/3/2015 Date of decision: 31/3/2015 ORDER NO.

Per : Ramesh Nair

This appeal is directed against Order-in- Appeal No. AT/M-III/141/2004 dtd. 25/10/2004 passed by the Commissioner of Central Excise (Appeals) Mumbai-III, wherein Order-in-Original No. Raigad/KPL/RC/10/2003-04 dated 27/2/2004 was upheld and appeal filed by the appellant was rejected. The issue involved in the present case is that whether the appellant is entitled to Cenvat Credit in respect of furnace oil used in the manufacture of goods on job work basis and cleared without payment of duty under notification No 214/86-CE dated 25/3/1986. The amount of Cenvat credit of Rs. 12,62,519/- availed on the furnace oil and was reversed from time to time. In respect of said reversal of Rs. 12,62,519/- appellant filed refund claim on the ground that issue on merit whether Cenvat Credit on the furnace oil is admissible to the appellant as has been decided by the Commissioner(Appeals) by his order in appeal No. RJM/M-III/307/2003 dated 14/7/2003. The adjudicating authority rejected the claim on the ground that the Order-in-Appeal dated 14/7/2003 was appealed against before the CESTAT Mumbai. Aggrieved by the said order the appellant filed appeal before the Commissioner (Appeals) who vide impugned order rejected the appeal of the appellant once going into merit of the case. However it was noticed that said appeal of the Revenue has been dismissed by this Tribunal vide order No. A/102/2010/EB/C-II dated 23/3/2010 wherein it was held that the appellant is entitled to take re-credit of the Cenvat credit in question in their Cenvat account.

2. Ms. Monali Salaskar Ld. Counsel alongwith Ms. Rajju Thakur advocate appeared on behalf of the appellant. As regard issue of admissibility of the Cenvat Credit in respect of fuel i.e. furnace oil used in the manufacture of the goods on job work basis in terms of Notification No. 214/86-CE dated 25/3/1986 she submits that issued has already been decided by the then Commissioner (Appeals) vide order No. RJB/M/III/307/2003 dated 22/8/2003 and same was upheld by this Tribunal, therefore rejection of claim is absolutely wrong and illegal. She also submits that against Order-in-Appeal dated 14/7/2003 in the appeal of the Revenue there was no challenge to the issue of unjust enrichment which had been decided by the Commissioner(appeals) in his order dated 14/7/2003 wherein Commissioner (Appeals) had given categorical finding that principle of unjust enrichment is not applicable in view of the proviso (c) of subsection (2) of Section 11B of Central Excise Act, 1944. Against the said order Tribunal also categorically observed in its order dated 23/3/2010 that the Revenue appellant has not raised plea of unjust enrichment in their appeal. It is her submission that issue on both counts i.e. unjust enrichment as well as merit of the case, admissibility of the Cenvat Credit has attained finality therefore appeal be allowed.

3. Shri. V.K. Shastri Ld. Asst. Commissioner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. However he agrees that in the first round of litigation admissibility of the Cenvat Credit on furnace oil in the appellant own case has been decided in their favour by this Tribunal vide order dated 23/3/2010.

4. We have carefully considered the submissions made by both the sides and perused the record.

5. We find that the issue involved is admissibility of Cenvat Credit in respect of furnace oil used in manufacture of job work goods in terms of notification no 214/86-CE dated 25/3/1986. In the appellants own case for the same amount after reversal of Cenvat credit of Rs. 12,62,519/- the appellant filed refund claim wherein a show cause notice F. No. V/18(DNKPL) RC-13/02/291 dated 5/12/2002 was issued proposing rejection of refund claim. It was adjudicated vide original order dated 11/4/2003 the refund claim was rejected on merit i.e. on admissibility of Cenvat Credit as well as on unjust enrichment. This order was set aside by the Commissioner(Appeals) vide order in appeal dated 14/7/2003 wherein he passed following order:

I have carefully looked into the facts and recores of the case in the light of submissions made in appeal and at the time of hearing. Rule 6(1) of the Cenvat Credit Rules, reads as under:

The Cenvat Credit shall not be allowed on such quantity of inputs which are used in the manufacture of the exempted goods, except under the circumstances mentioned in sub rule 2. Rule 6(2) reads that where a manufacturer avails of Cenvat Credit in respect of any inputs except inputs intended to be used as fuel and manufactures such products which are chargeable to duty as well as exempted goods, the manufacturer shall maintain separate account for receipt, consumption and inventory of inputs meant for use in the manufacturer of exempted goods, and take Cenvat Credit only on that quantity of inputs which is intended for use in the manufacture of dutiable goods.

Rele 6(2) further provides that in case of common inputs used in the manufacture of duty paid as well as exempted goods, the manufacturer shall pay an amount equal to 8% of the price of the exempted goods.

It is thus clear that the Rule provides an exception for fuel used as input. It means that when a manufacturer avails credit on an input used as fuel and manufactures a final product or products, a part of which is cleared without payment of duty, he will not be required to pay 8% of the price of such goods cleared without payment of duty. A comprehensive and harmonious reading of the above procedure only leads to conclusion that the Rules have created an exception in respect of the inputs used as fuels and neither any Cenvat Credit is required to be reversed for such inputs used in the manufacture of final products cleared without payment of duty nor such final product are called upon to pay an amount of 8% of the price.

As regards the question of unjust enrichment, I find that thte principle of unjust enrichment is not applicable in view of the proviso (c) to sub-section 2 of Section 11B of the Central Excise Act which carves out an exception in respect of cases involving credit of duty. The Apex Court Judgment in respect of M/s. Solar Pesticides P. Ltd. Vs. Union of India 2000(116) ELT 401 SC had not dealt with the question of Section 11B.(2) C and therefore cannot be made applicable to this case. Rather I rely upon Tribunals latest judgment in the case of Commissioner of Customs and Central Excise, Ahmedabad. M/s. Durasyntex Ltd. as reported in 2003(154)ELT 422 TRB.

Having regard to the discussion above, I set aside the Order-in-Original and admit the appeal.

The aforesaid order was challenged by the Revenue before the CESTAT in appeal no. E/3093/ 03 which was disposed of by this tribunal vide order no. A/102/2010/EB/C-II dated 23/3/2010 wherein tribunal has passed following order:

2. In the present appeal filed by the Revenue against the appellate Commissioners order, it is submitted that the benefit of Rule 57AD(2) of the Central Excise Rules, 1944 and Rule 6(2) of the Cenvat Credit Rules cannot be extended to fuels including furnace oil. We have not found any elaboration of this point in the Revenues memo of appeal, nor has the learned SDR been able to add anything to it. On the other hand, it is submitted by the learned counsel for the respondent that what was claimed by them was only re-credit of the Cenvat credit reversed earlier in their account. It is submitted that the respondent was entitled to take Cenvat Credit of the duty paid on furnace oil which was used in the job work of converting billets in to wire rods and bars which were supplied to the principal manufacturer without payment of duty. In this context, the learned counsel has relied on the Tribunals larger Bench decision in Sterlite Industries (I) Ltd. Vs. CCE, Pune 2005(183) ELT 353(Tri- LB).

3. The Larger Bench was dealing with a similar factual situation. Following the apex courts ruling given in Escorts Ltd. Vs. CCE 2004(171) ELT 145(SC), the Larger Bench held that Modvat credit of the duty paid on the inputs used in the manufacture of final product cleared without payment of duty for further utilization in the manufacturer of final product to be cleared on payment of duty by the principal manufacturer could be availed by the job worker unaffected by the provisions of Rule 57C. The said Rule had injuncted a manufacturer of final product from taking Modvat credit of the duty paid on inputs used in or in relation to the manufacture of final products exempted from payment of duty or chargeable to nil rate of duty. The Larger Bench decision proceeded on the premise that Rule 57C was not applicable to a job worker who claimed MODVAT credit on inputs used in or in relation to the manufacture of the job-worked goods. In other words, the job worked goods cleared by the job worker to the principal manufacturer were not recognized to be exempted for purpose of Rule 57C. Those goods were dutiable in the hands of the principal manufacturer who admittedly paid duty thereon.

4. The learned counsel has further pointed out that the appeal filed by the department against the Tribunals larger Bench decision in Sterlite Industries case was dismissed by the Honble High Court on the ground that no question of law arose. In other words, the law laid down by the Tribunals Larger Bench stood approved. We note that this aspect is clearly discernible from the text of the High Courts judgment in Tata Motors Ltd. vs. UOI 2009(244) ELT 337(Bom).

5. In the result, in terms of the Tribunals Larger Bench decision, it is held that the respondent is entitled to take re-credit of the Cenvat Credit in question in their Cenvat account. We note that the appellant has not raised the plea of unjust enrichment in this appeal.

6. The appeal is dismissed.

From above proceedings it is absolutely clear that the issue which is before us in the present appeal has already attained finality. The present appeal is against the proceeding which is second time of the same amount due to the reason that after the Commissioner (Appeals) order NO. AT/M-III/141/2004 dtd. 25/10/2004 the appellant once against filed application for refund because against first rejection the appeal of the Revenue was pending before this Tribunal. Now since the issue on the refund/re-credit of Cenvat and also on unjust enrichment has been finally decided by this Tribunal in order dated 23/3/2010 this appeal deserve to be allowed. We therefore hold that appellant is entitled for re-credit of amount reversed by them in respect of furnace oil subject to verification of the said amount by adjudicating authority. The adjudicating authority shall ensure the correct amount of re-credit to the appellant. The appeal is allowed by way of remand only fro a limited purpose i.e. verification of amount.

(Operative part pronounced in court)

PK. Jain Member (Technical) Ramesh Nair Member (Judicial)

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