Rajarambapu Patil Ssk Ltd vs Commissioner Of Central Excise ...

[Arising out of Order-in- Original No. 28/CEX/COMMR/KOP/2011 dtd. 30/11/2011 passed by the Commissioner of Central Excise Kolhapur]

For approval and signature:

Honble Mr. P.K. 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?

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Rajarambapu Patil SSK Ltd. : Appellant

VS

Commissioner of Central Excise Kolhapur : Respondent

Appearance

Shri. J.N. Somaiya, Advocate for the Appellant Shri. A. Nath, Asstt. Commissioner(A.R.) for the Respondent

CORAM:

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

Date of hearing: 8/1/2015 Date of decision 8/1/2015

ORDER NO.

Per : Ramesh Nair

The appeal is directed against Order-in- Original No. 28/CEX/COMMR/KOP/2011 dtd. 30/11/2011 passed by the Commissioner of Central Excise Kolhapur, wherein following order was passed:

Order i. I confirm the demand of Rs. 1,69,89,466/- (Rupees One Crore Sixty Nine lakhs Eighty Nine Thousand Four Hundred and Sixty Only) on M/s. Rajarambapu Patil Sahakari Sakhar Karkhana Ltd., (Unit NO. 2), Wategaon, Tal-Walwa, Dist- Sangli, being the amount equal to 10%/5% of the value of electricity sold during the period from April, 2007 to August, 2010, under provisions of Section 11A(2) of the Central Excise Act, 1944, read with Rule 14 of the Cenvat Credit rules, 2004.

ii. Interst on the above amount shall be paid by M/s. Rajarambapu Patil SSK Ltd. Unit No. 2 Wategaon, under Section 11AB of the Central Excise Act, 1944, read with Rule 14 of the Cenvat Credit rules, 2004.

iii. I impose a penalty of Rs. 1,69,89,466/- (Rupees One Crore Sixty Nine lakhs Eighty Nine Thousand Four Hundred and Sixty Only) on M/s. Rajarambaput Patil Sahakari Sakhar Karkhana Ltd.,(Unit No. 2) Wategaon, Tarl Walwa, Dist Sangli, under Rule 15(2) of the Cenvat Credit Rules 2004 read with Section 11AC of the Central Excise Act, 1944.

I give an option to the assessee that if the confirmed duty amount is paid along with interest, within thirty (30) days from the date of communication of this order, the amount of penalty liable to be paid by them shall be reduced to Rs. 42,47,367/-[i.e. Twenty five percent of Rs. 1,69,89,466/-] as per the provisions of first proviso to section 11AC of the Central Excise Act. 1944.

As per the provisions of second proviso to section 11AC of the Central Excise Act, 1944, the benefit of such reduced penalty of Rs. 42,47,367/- shall be available to the assessee only if the same is also paid within the period of thirty (30) days from the date of communication of this order.

1.1 The fact of the case is that the appellant is engaged in the manufacture and clearances of Sugar and Molasses falling under Chapter 1701 & 1703 of the first schedule to the Central Excise Tariff Act, 1985 respectively. They availed the facility of Cenvat credit under the Cenvat Credit Rules, 2004. The Sugar and Molasses manufactured by them are cleared on payment of appropriate Central Excise Duty leviable thereon. They also generates Electricity which is supplied/sold to M/s. Maharashtra State Electricity Board(MSEB) without payment of duty in accordance with the Central Excise Tarrif Act, 1985. The adjudicating authority has confirmed the demand towards 10% / 5% as the case may be of value of exempted electricity generated and supplied in term of Rules 6(3) Cenvat Credit Rules, 2004.

2. Shri. J.N. Somaiya, Ld Counsel for the appellant submits that in the manufacture of Sugar and Molasses from sugar cane Bagasse is generated. The said bagasse burnt in the boiler as fuel and steam is generated. The steam is used in the turbine for generation of the electricity. The said electricity partly used in the factory for running plant and partly sold to M/s. MSEB. It is his submission that for the generation of electricity no excisable input is used and only bagasse and DM water is used, which are not Cenvatable inputs. Therefore demand of 10%/5% as the case may be in terms of Rule 6(3) of Cenvat Credit Rules, 2004 is not sustainable. He submits that in the absolutely identical issue and in respect of manufacturer of the sugar/molasses the Honble High Court of Allahabad in case of Gularia Chini Mills Vs. Union of India and others[2013-TIOL-568-HC-ALL-CX] held that in terms of Rule 6 of Cenvat Credit Rules, 2004 reversal of 10%/5% of the amount value of electricity generated by using bagasse is not applicable. This judgment has been followed by the Division Bench of this Tribunal in the case of CCE, Kolhapur Vs. Shree Datta SSK Ltd.[A-758-761/14/EB/C-II dated 13/11/2014] wherein the appeal filed by the Revenue was dismissed. He submits that in view of the settle legal position as stated above the demand confirmed by the Commissioner is not correct and legal.

3. On the other hand, Shri. A. Nath, Asstt. Commissioner(A.R.) appearing for the Revenue reiterates the findings of the impugned order.

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

5. In the present case the demand of 10%/5% of the value of electricity generated and supplied to M/s. MSEB was made in terms of Rule 6(3) of Cenvat credit Rule, 2004. The undisputed fact is that the appellant is sugar/molasses manufacturing unit, electricity so generated and supplied to M/s. MSEB is manufactured out of bagasse. The identical issue has been decided by the Honble Gularia Chini Mills Vs. Union of India(supra) held as under:-

For the discussions made hereinabove, it is clear that Geetanjali Woolern Mill judgment relied upon by the Commissioner in the impugned orders have no relevance as Geetanjali Woolens Mills judgment was in respect of custom duty and was only concerned with the tariff item and not with respect to the excisable goods as defined under Section 2(d) of Central Excise Act, 1944. The bagasse, which emerges as a residue of sugarcane, admittedly, is a waste product and this bagasse is used in boiler as a fuel for generation of steam for running the turbine and for boiling the juice for the manufacture of sugar. Turbine generates electrical energy which is used for running the plant and machinery and surplus energy is sold to the U.P. Power Corporation Ltd. Further more, bagasse is used as fuel in the factory for manufacture of final product and no specific input is used up to the stage of emerging of bagasse which is a waste and which emerges on the crushing of sugarcane. Thus, we have no hesitation to say that electrical energy emerges from the bagasse and sold to U.P Power Corporation Ltd. does not fall within the ambit of excisable goods.

Following the same judgment of Honble High Court, the coordinate bench of this Tribunal also decided the issue in the case of CCE, Kolhapur Vs. Shree Datta SSK Ltd (Supra) wherein held as under:

6. In this case the facts are not in dispute that only bagasse, a byproduct, on which no duty is payable, is used in generationof electricity as fuel. Bagasse is put into the boiler and steam generates and by the pressure of steam, turbine generates electricity but no steam is being used in the manufacture of electricity. In these circumstances, the case laws relied upon by the learned A.R. have no relevance to the facts of the case. In the case of sanghi Industries Ltd(supra), the inputs were furnace oil/lubricants which were used in generation of electricity and in the case of MCC PTA India Corpn. Pvt Ltd.(Supra), fuel and other goods were used in generating of electricity. Therefore, the facts of the case laws relied upon by the learned A.R. are not applicable to the facts of this case.

7. We further find that the facts of the case of Gularia Chini Mills(Supra) are relevant to the facts of the this case, wherein the Honble High Court has held that the electrical energy generated from bagasse is not covered under Chapter 27. Therefore, electrical energy is not an excisable goods nor is it exempted as defined in Section 2(d) of the Act. It was further held that the electricity is not an excisable goods under Section 2(d) of the Act, hence Rule 6 of the Cenvat Credit Rules is not applicable as held by the Honble Supreme Court in the case of Solaris Chemtech Ltd. Therefore, relying on the decision of the Honble Allahabad High Court, we hold that the respondents are not required to reverse an amount of 10% of the value of electricity sold by the respondents to MSEDCL. Therefore, we do not find any infirmity in the impugned order and the same is upheld. The appeal filed by the Revenue are dismissed.

From the above judgments it is clear that issue that 10%/5% value of electricity generated from use of bagasse and sold to M/s. MSEB is applicable in terms of Rule 6(3) of Cenvat Credit Rule is settled in favour of assessee and accordingly the impugned order is not sustainable. We therefore allow the appeal with consequential relief, if any, in accordance with law.

(Operative part pronounced in the Court)

P.K. Jain Member (Technical) Ramesh Nair Member (Judicial)

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