M/S. Shree Chalthan Vibhag Khand Udyog ... vs Commissioner Of Central Excise & S.T., ...

(Arising out of OIA-CCEA-SRT-II-SSP-251-2012-13-U-S35A-3--FINALORDER- dated 11.01.2013, Passed by Commissioner (Appeals) Central Excise, & S.T., Surat)

M/s. Shree Chalthan Vibhag Khand Udyog Sahakari Mandli Ltd : Appellant

VERSUS

Commissioner of Central Excise & S.T., Surat : Respondent

Represented by :

For Appellant (s) : Shri J.C. Patel, Advocate For Respondent (s) : Shri J. Nair, Authorised Representative

For approval and signature :

Mr. H.K. Thakur, Honble Member (Technical)

1 Whether Press Reporter 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 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

CORAM :

Mr. H.K. Thakur, Honble Member (Technical)

Date of Hearing / Decision : 22.06.2015

ORDER No. A/10833 / 2015 Dated 22.06.2015

Per : Mr. H.K. Thakur;

This appeal has been filed by the appellant against OIA No. OIA-CCEA-SRT-II-SSP-251-2012-13-U-S35A-3--FINALORDER- dated 11.01.2013 under which OIO No. 02/ADJ/ADC-BA/D/12-13 dated 14.05.2012 passed by the Adjudicating authority has been upheld. The issue involved in this appeal is whether 5% amount under Rule 6 of the Cenvat Credit Rules, 2004 is required to be paid by the appellant on Bagasse cleared by the appellant at Nil rate of duty when CENVAT credit is taken on the inputs.

2. Shri J.C. Patel, (Advocate) appearing on behalf of the appellant relied upon the following case laws to argue that no amount is required to be paid even after the amendment of Section 2(d) of the Central Excise Act, 1944 with effect from 15.05.2008:-

(a) Commissioner of Central Excise, Ahmedabad-III vs. Nirma Limited  [2012 (281) ELT 654 (Guj.)]

(b) Indian Potash Limited vs. CCE, Allahabad  [2012 (281) ELT 622 (Tri. Del.)] Learned Advocate argued that as per Para 6 of the case law Indian Potash Limited vs. CCE, Allahabad (supra), CBEC Circular No. 904/24/2009-CX dated 28.10.2009 has also been considered and credit is held admissible. That findings of Commissioner (Appeals) are therefore no sustainable.

3. Shri J. Nair (AR) appearing on behalf of the Revenue defended the order passed by the first appellate authori8ty that after amendment of Section 2(d) with effect from 10.05.2008, Bagasse has to be treated as exempted goods and amount as per Rule 6(3) of the Cenvat Credit Rules,, 2004 has been correctly confirmed against the appellant.

4. Heard both sides and perused the case records. The issue involved in the present appeal is whether or not appellant is required to maintain separate record for inputs used in the manufacture of dutiable and exempted goods. It is observed from reply dated 28.06.2011, filed by the appellant to the show cause notice that sugarcane is pushed into a cane crushing Mill to get Bagasse waste and sugarcane raw juice. It has not been brought on record as to what inputs, on which credit is taken is used during the process of crushing sugarcane into waste. The credit on chemicals etc. is taken for converting sugarcane raw juice to commercial sugar or molasses which are cleared on payment of duty. In the absence of any evidence on record, to show credit taken inputs used in the making of Bagasse, the ratio of High Courts order in the case of CCE, Ahmedabad-III vs. Nirma Limited (supra) will be applicable. Para 3 and 4 of this case law observed as follows:-

3.?Counsel for the Revenue was confronted with the decision of this Court in Tax Appeal No. 1736 of 2009 wherein though the products under consideration were different, legal issue was similar. We find that a Division Bench of this Court in the case of Sterling Gelatin (Tax Appeal No. 1736 of 2009 decided on 09-9-2010) - 2011 (270) E.L.T. 200 (Guj.) was considering a product, i.e. mother liquor as a by-product in manufacture of gelatin. Referring to rule 6 of the Cenvat Rules, the Division Bench opined as under :

8.?Thus, on a plain reading sub-rule (1) of rule 6, it is apparent that CENVAT credit is admissible in respect of the inputs used in the manufacture of dutiable goods and is inadmissible on such quantity of inputs which is used in the manufacture of exempted goods. Sub- rule (2) imposes an obligation on the manufacturer who manufactures final products and exempted goods from the common input to maintain separate accounts for receipt, consumption and inventory of inputs. Examining the applicability of the aforesaid rules to the facts of the present case, as noted hereinabove, it is not as if more quantity of Hydrochloric Acid is used than that required for manufacturing Gelatin or that by using a smaller amount of Hydrochloric Acid, the production of Mother Liquor could be averted. In the manufacturing process adopted by the assessee, it is not possible to manufacture Gelatin without Mother Liquor coming into existence. Thus, when the entire quantity of input viz. Hydrochloric Acid is used in the manufacture of the final product being Gelatin which is a dutiable product, the mere fact that a by-product emerges during the process, would not bring the by-product within the ambit of Rule 6 of the Rules so as to call for maintaining separate accounts in respect of the same. When the entire quantity of input is used in the manufacture of Gelatin, the question of maintaining separate accounts or of paying a percentage of the total price of the exempted goods would not arise. In the peculiar facts of the present case, sub-rule (1) of rule 6, itself would not come into play inasmuch the manufacturer does not deliberately use any quantity of the inputs, viz. Hydrochloric Acid for manufacturing Mother Liquor, the entire Hydrochloric Acid is used in the manufacture of Gelatin. Thus, when no input is specifically used for the purpose of manufacturing Di-Calcium Phosphate, there would be no question of maintaining separate accounts for receipt, consumption and inventory of input.

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13.?Insofar as reliance placed upon the decision of the Bombay High Court in the case of Commissioner of Central Excise, Thane-1 v. Nicholas Piramal (India) Ltd. (supra) is concerned, the same would have no applicability to the facts of the present case inasmuch as in the facts of the said case, common input had been consciously used in the manufacture of two final products, whereas in the facts of the present case, the input Hydrochloric Acid is used for the manufacture of Gelatin alone, however during the course of manufacturing process a by-product viz. Mother liquor also emerges.

4.?We are, of course, concerned with different products in the present case. The assessee in the process of manufacturing soap uses acid slurry and in the process Spent sulphuric acid gets generated as a bye product. Though the products may be different, the ratio laid down by this Court would apply to the facts of the present case. We, therefore, do not think that the Tribunal committed any error in holding against the revenue. Tax Appeal is therefore, dismissed.

5. In the case of Indian Potash Limited vs. CCE, Allahabad (supra), CESTAT, Delhi considered CBEC Circular No. 904/24/2009-CX dated 28.10.2009 and following observations were made in Para 6 while allowing the appeal of Indian Potash Limited with respect to Bagasse:-

6.?We have considered the rival submissions. We find that bagasse emerges in course of crushing of the sugarcane. It may be noted that crushing of sugarcane is necessary to extract cane sugar juice which in turn is processed for production of sugar and molasses. Bagasse is the waste product left after the crushing of sugarcane. Therefore, by no stretch of imagination it can be said that the assessee possibly could have maintained separate accounts for the inputs for production of sugar and molasses (excisable item) and bagasse. Thus, in our considered view, the amendment in Finance Act, cited by Shri Nagesh Pathak, AR and the Board Circular would not make any difference in the facts and circumstances of the case. Moreover neither the show cause notice nor the impugned order in appeal mentions as to which common Cenvat credit availed inputs have been used in manufacture of sugar and molasses (dutiable final product) and bagasse (exempted final product. Since Bagasse emerges at sugarcane crushing stage, there is no possibility of any input-chemicals etc. having been used at that stage. Accordingly, we find merit in the contention of the appellant. The impugned order is set aside. The appeal and stay applications are allowed.

6. The order passed by CESTAT Delhi, in the case of Indian Potash Limited vs. CCE (supra) is on the same issue. Therefore, respectfully following the ratio laid down by CESTAT Delhi and Hon'ble Gujarat High Court, appeal filed by the appellant is allowed.

(Order dictated and pronounced in the Court)

(H.K. Thakur) Member (Technical) .KL

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