Custom, Excise & Service Tax Tribunal
M/S.N.S.Ispat Private Limited vs Cce, Raipur on 20 November, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH NEW DELHI
Date of Hearing/ Decision:20.11.2015
Excise Appeal No.54209/2014-EX (DB)
[Arising out of Order-in-Appeal No.85/RPR-I/2014 dated 31.03.2014 passed by the Commissioner of Central Excise(Appeals), Raipur].
M/s.N.S.Ispat Private Limited Appellants
Vs.
CCE, Raipur Respondent
Appearance:
Rep. by Shri Abhas Mishra, Advocate for the appellant. Rep. by Shri R.K. Mishra, DR for the respondent. For approval and signature:
Honble Shri Ashok Jindal, Member (Judicial) Honble Shri B. Ravichandran, Member (Technical) 1 Whether Press Reporters may be allowed to see 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 of the Order?4
Whether Order is to be circulated to the Departmental authorities?
Coram: Honble Shri Ashok Jindal, Member (Judicial)
Honble Shri B. Ravichandran, Member (Technical)
Final Order No.53526/2015 Dated:20.11.2015
Per Ashok Jindal:
Heard both the sides.
2. The facts of the case are that the appellant are manufacturer of M.S. Ingots from sponge iron. In the course of manufacture of M.S. Ingots, slag dust is generated as by-products which is fully exempt from duty under notification no.4/06-CE dated 1.3.2006 and accordingly slag dust was cleared at nil rate of duty. The period of dispute in this case is from 2009-10 to 2011-12. The appellant were availing cenvat credit of duty paid on sponge iron and other inputs/input service. The department was of the view that since the appellant were using common inputs in relation to manufacture of dutiable goods (M.S. Ingots) and exempted goods (Slag dust) and they are not maintaining separate accounts for inputs/input services used in the manufacture of dutiable goods and exempted final products, in respect of clearance of slag dust an amount of 5% of the sale value of the slag dust cleared at nil rate of duty would be payable under Rule 6(3) of the Cenvat Credit Rules, 2004. It is on this basis that the Dy. Commissioner vide order-in-original dated 31.01.2014, confirmed the demand of Rs.3,77,770/- against the appellant under Rule 6(3)(i) of Cenvat Credit Rules, 2004 read with Rule 14 and Section 11 A along with interest on it under Section 11 AB of Central Excise Act, 1944 and besides this, imposed penalty of equal amount on the appellant under Rule 15 of Cenvat Credit Rules, 2004 read with Section 11 AC. On appeal being filed to the Commissioner (Appeals) against this order of the Deputy Commissioner, the Commissioner (Appeals) while upholding the order of the Deputy Commissioner held that slag dust is marketable and excisable in view of the amended definition of excisable goods under Section 2(d) of Central Excise Act, 1944. Against this order of the Commissioner (Appeals), this appeal has been filed.
3. Shri A. Mishra, the learned Consultant for the appellant pleaded that the provisions of Rule 6(2) and Rule 6(3) of Cenvat Credit Rules, 2004 are not applicable to this case as the slag dust emerges as inevitable and unavoidable waste, that in this case even if the manufacturer wants to maintain separate account of inputs meant for manufacture of dutiable and exempted final products, it is impossible to maintain such separate account and, therefore, the provisions of Rule 6(3) would not be applicable, that he relies upon the judgement of Honble Bombay High Court in the case of Rallies India Ltd. Vs. Union of India - 2009 (233) ELT 301 (Bombay) wherein in the background of similar facts involving an identical issue, it has been held that provision of Rule 57 CC would not be applicable in respect of mother liquor arising in the manufacture of gelatine, that the same view has been taken by Honble Gujarat High Court in the case of CCE Vs. Nirma Ltd. 2012 (281) ELT 654 (Gujarat ) wherein the High Court has held that when the entire quantity of input was used in the manufacture of a dutiable final product and an exempted by-product emerges during the process of manufacture, there was no question of maintaining separate accounts or paying a percentage of total price of the exempted by-product, that the apex Court in the case of Hindustan Zinc Ltd. Vs. Union of India 2014 (303) ELT 321 (SC) has held that when in the course of manufacture zinc or copper during calcinations of ore concentrates, sulphuric acid emerged as inevitable technical necessity, the provisions of Rule 57CC would not be applicable and the amount of 8% of sale price of exempted sulphuric acid cleared to fertilizers plants would not be payable, that the ratio of these judgements is squarely applicable to the facts of this case, and that in view of the above, the impugned order is not sustainable.
3. R.K. Mishra, ld. DR defended the impugned order by reiterating the findings of the Commissioner (Appeals) in the impugned order, and emphasized that slag dust emerging as by-product is an excisable goods in view of the clause (d) of Section 2 of Central Excise Act as the same was being sold and since it is full exempt from duty under Notification No.4/06-CE, it has to be treated as exempted goods in terms of definition of this term in Rule 2(d) of Cenvat Credit Rules, 2004 and since common cenvat credit availed have been used in relation to the manufacture of dutiable and exempted final product and since the provisions of sub-rule (2) of Rule 6 had not been complied with, the provisions of Rule 6(3) would become applicable and therefore the provisions of Rule 6(3) (i) of Cenvat Credit Rules have been correctly invoked. He, therefore, pleaded that there is no infirmity in the impugned order.
4. We have considered the submissions made from both the sides and perused the records.
5. The appellant are manufacturer of M.S. Ingots from sponge iron. In the course of manufacture of M.S. Ingots, slag dust arises which is waste and the same is fully exempt from duty under notification no.4/06-CE dated 1.3.2006. The Departments case against the appellant is that since the cenvat credit availed inputs have been used for manufacture of dutiable and exempted final products and since the appellant have not complied with the provisions of sub-rule (2) of Rule 6, the provisions of sub-rule (3) of Rule 6 of Cenvat Credit Rules, 2004 would be applicable and invoking clause (i) of Rule 6(3), an amount of 5% of the total sale value of the slag dust cleared at nil rate of duty has been demanded.
6. In terms of sub-rule (2) of Rule 6, where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services and manufacturers such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or exempted services, then the manufacturer or provider of output service shall maintain separate accounts and inventory for the receipt and consumption of inputs and input service used in or in relation to the manufacture of exempted goods/exempted services and those used in or in relation to the manufacture of dutiable final products or providing exempted output service and take credit only on that quantity of inputs/input services which is intended for use in the manufacture of dutiable final product or providing output service on which no service tax is payable. According to the sub-rule (3) of Rule 6, notwithstanding anything contained in sub-rule (1) and (2), the manufacturer or the provider of output, opting not to maintain separate accounts, shall follow options as specified in this sub-rule. One of the options available to the person under sub-rule (3) who does not comply with the provisions of sub-rule (2) of Rule 6 is to pay an amount equal to 5% of sale value of the goods. Another option available is reversing proportionate cenvat credit as per the formula prescribed under Rule 6 (3A). However, from reading of sub-rule (2) and sub-rule (3) of Rule 6, it is clear that sub-rule (3) is applicable only when the provisions of sub-rule (2) are not complied with by a manufacturer. In this case, in course of manufacture of MS Ingots, slag dust arises as an inevitable by-product and in the present case, even if manufacturer, in accordance with the provisions of Rule 6 (2), wants to maintain separate account or inventory of inputs/input services used in the manufacture of dutiable product - MS ingots and take credit only in respect of inputs and inputs services used in the manufacture of MS ingots, this is impossible a slag emerges as an inevitable and unavoidable by-product. Separate account and inventory as per the provisions of Rule (2) can be maintained only when a manufacturer using common inputs/input services consciously manufactures final products one dutiable and other exempt in two separate processes. But complying with Rule 6 (2) is impossible where while manufacturing a product A, a product B emerges as an unavoidable by-product or as waste. Lex Non Cogit ad Impossibila is a well settled legal principle applicable in respect of taxation matters also. When it is impossible to comply with the provisions of sub-rule (2) of Rule 6, it would not be applicable. Sub-rule (3) of Rule 6 becomes applicable only when the manufacturer does not comply the provisions of sub-rule (2) and the provisions of sub-rule (3) would not be applicable in the cases where the sub-rule (2) is inapplicable.
7. We find that same view has been taken by the Honble High Court of Gujarat in the case of Nirma Ltd (Supra), by the Honble Bombay High Court in the case of Rallis India Ltd (Supra) and by the Apex Court in the case of Hindustan Zinc Ltd. (Supra). Therefore, the appellant are not liable to pay any amount in respect of clearance of slag/dust which has been cleared by them without payment of duty as same has been emerged during the course of manufacture of M.S. Ingots. Therefore, we do not find any merit in the impugned order. Same is set aside. Appeal is allowed with consequential relief, if any.
[operative portion of the order already pronounced in open court] (Ashok Jindal) Member (Judicial) ( B. Ravichandran) Member (Technical) Ckp.
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