S.M. Shankarrao Mohite Patil Ssk Ltd vs Commissioner Of Central Excise, ...

(Arising out of Order-in-Appeal No. P-III/249/05 dated 8.8.2005 passed by Commissioner of Central Excise (Appeals), Pune-III)

For approval and signature:

Honble Mr. P.K. Jain, Member (Technical) and 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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S.M. Shankarrao Mohite Patil SSK Ltd. Appellant Vs. Commissioner of Central Excise, Pune-III Respondent

Appearance:

Shri Gajendra Jain, Advocate, for appellant Shri V.K. Shastri, Assistant Commissioner (AR), for respondent

CORAM:

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

Date of Hearing: 19.3.2015 Date of Decision: 19.3.2015

ORDER NO

Per: P.K. Jain

Brief facts of the case are that the appellant is engaged in the manufacture of sugar, molasses, denatured ethyl alcohol, undenatured alcohol, acetic acid etc. During the manufacturing process, molasses emerges, which is captively used by them in their factory for further manufacture of their other products. In addition, they are also buying molasses from other manufacturer availing cenvat credit on the same and using molasses in the production of certain final products. In the Budget 2002, the Cenvat Credit Rules were amended and the provisions of Rule 6 were amended with reference to ethyl alcohol falling under Chapter Heading 22.04 to the extent that the manufacturer who manufactures dutiable as well as exempted final products using the same inputs, will be required to pay an amount equal to the cenvat credit attributable to the inputs used in the manufacture of exempted final products. The appellant did not follow the said Rule for the inputs received before 1.3.2002 but reversed 8% of the value of the exempted products. The appellant was issued two show cause notices and the demands were confirmed vide order-in-original dated 25.2.2004. The appellant filed appeal against the said order before the first appellate authority who, after hearing the case, dismissed the appeal. Aggrieved by the said order, the appellant is before us.

2. The appellant has also filed a miscellaneous application saying that certain quantity of the exempted products were cleared for export under bond or used for captive consumption and if the benefit of these is extended, their liability will substantially come down.

3. The learned counsel for the appellant argued that they have availed the credit as per the law prevalent at that point of time, and as per the law at that point of time, they are required to pay an amount equal to 8% of the value of the exempted goods, which they have done and, therefore, no further liability remains. In support of his contention, the learned counsel quoted this Tribunals Larger Bench decision in the case of CCE, Rajkot vs. Ashok Iron & Steel Fabricators reported in 2002 (140) ELT 277 (Tri.-LB) which has been affirmed by the Honble Supreme Court as reported in 2003 (156) ELT A212 (SC). The learned counsel also quoted the Larger Bench decision of this Tribunal in the case of HMT vs. CCE, Panchkula reported in 2008 (232) ELT 217 (Tri.-LB). In addition, the learned counsel also quoted number of other judgments.

4. The learned AR, on the other hand, reiterated the findings in the impugned order and submitted that w.e.f. 1.3.2002, the scheme relating to obligation of a manufacturer of dutiable and exempted goods was amended and as per the new Rule, they are required to pay an amount equal to the cenvat credit attributable to the inputs used in or in relation to the manufacture of such final products at the time of their clearance from the factory. The learned AR also submitted that this obligation came into effect on 1.3.2002 and the date of receipt of the inputs or the credit taken is irrelevant for determination of the issue.

4.1 As far as the miscellaneous application is concerned, the learned AR stated that none of these claims were made in reply to the show cause notice or before the first appellate authority and in view of this position, the miscellaneous application should not be admitted and the appellant cannot be allowed to make new claims at the Tribunal level.

5. We have considered the rival submissions. The Cenvat Credit Rules, 2002 were amended and the relevant Rule is 6(3), which reads as under:-

(3) The manufacturer, opting not to maintain separate accounts shall follow either of the following conditions, as applicable to him, namely: -

(a) if the exempted goods are-

(i) goods falling within heading No. 22.04 of the First Schedule to the Tariff Act;

(ii) Low Sulphur Heavy Stock (LSHS) falling within Chapter 27 of the said First Schedule used in the generation of electricity;

(iii) Naphtha (RN) falling within Chapter 27 of the said First Schedule used in the manufacture of fertilizer;

(iv) tyres of a kind used on animal drawn vehicles or handcarts, and their tubes, falling within Chapter 40 of the said First Schedule;

(v) newsprint, in rolls or sheets, falling within heading No. 48.01 of the said First Schedule;

(vi) final products falling within Chapters 50 to.63 of the said First Schedule,

the manufacturer shall pay an amount equivalent to the CENVAT credit attributable. to inputs used in, or in relation to, the manufacture of such final products at the time of their clearance from the factory; or

(b) if the exempted goods are other than those described in condition (a), the manufacturer shall pay an amount equal to eight per cent, of the total price, excluding sales tax and other taxes, if any, paid on such goods, of the exempted final product charged by the manufacturer for the sale of such goods at the time of their clearance from the factory.

Explanation I  The amount mentioned in conditions (a) and (b) shall be paid by the manufacturer by debiting the CENVAT credit or otherwise.

Explanation II. - If the manufacturer fails to pay the said amount, it shall be recovered along with interest in the same manner, as provided in rule 12, for recovery of CENVAT credit wrongly taken.

5.1 It would be seen that in the case of a manufacturer who is manufacturing the dutiable as well as exempted goods, he has an option to keep a separate record for the inputs used in the manufacture of dutiable goods and separate record in respect of the inputs used in the manufacture of exempted goods. In case the manufacturer is not maintaining separate accounts, the situation is covered by Rule 6(3). Before 1.3.2002, the manufacturer was required to pay an amount equal to 8% of the total price including sales tax and other taxes, if any, paid on such goods. On 1.3.2002 vide clause (a), certain goods have been excluded from the benefit of scheme of 8%. It is not under dispute that the goods falling under Heading 22.04 were produced by the appellant and were excluded from the said scheme. Thus, from 1.3.2002 onwards, the manufacturer was required to pay an amount equivalent to the cenvat credit attributable to the inputs used in or in relation to the manufacture of such final products at the time of clearance from the factory. Availing the credit when the inputs are received is one action. The liability to pay an amount in respect of the exempted goods has nothing to do with the date of taking the credit. On the contrary, it is the date of clearance of the final products. We, therefore, do not find any substance whatsoever in the claim of the appellant.

5.2 We have gone through the case laws quoted by the appellant, which are entirely in different context and are not for the liability of a manufacturer to pay certain amounts at the time of clearance. These case laws are with reference to taking of the credit on inputs. We do not consider it necessary to even discuss the various case laws mentioned by the learned counsel for the appellant.

6. The next contention of the appellant is relating to the benefits for the goods cleared for export under bond or used for captive consumption. The appellant is also claiming that there have been certain mistakes in the computation. We find that all these claims have been made for the first time at the Tribunal stage. These claims were never made before the original authority or the first appellate authority. However, in the interest of justice, we allow the said miscellaneous application. However, the matter is remanded back to the original authority to examine these claims of the appellant. The appellant will produce all the connected documents and details to the original authority within two months from the date of receipt of this order. The original authority will thereafter examine and decide the eligibility or otherwise in accordance with law after following the principles of natural justice. Needless to say the appellant will extend full co-operation and will not seek adjournment or delay the proceedings.

7. The appeal is disposed of by way remand in above terms.

(Operative part pronounced in Court)

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

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