Custom, Excise & Service Tax Tribunal
M/S.Real Ispat & Power Ltd vs Commissioner, Central Excise & ... on 22 January, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.2, R.K. PURAM, NEW DELHI-110066
BENCH-SM
COURT IV
Excise Appeal No.E/51572/2014-EX [SM]
[Arising out of Order-in-Appeal No.400(CE)/RPR-I/2013 dated 06.12.2013 passed by the Commissioner (Appeals), Customs, Central Excise and Service Tax, Raipur]
For approval and signature:
HONBLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)
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?
M/s.Real Ispat & Power Ltd. Appellant
Vs.
Commissioner, Central Excise & Custorm, Raipur Respondent
Present for the Appellant : Shri.Manish Saharan, Advocate
Present for the Respondent: Shri.G.R. Singh, D.R.
Coram: HONBLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)
Date of Hearing : 24.07.2015
Date of Pronouncement: 22.01.2016
FINAL ORDER NO. 50092/2016
PER: S.K. MOHANTY
The brief facts of the case are that the appellant is a manufacturer of Sponge Iron and uses coal as a main raw material for manufacture of the said product. Sometimes, coal procured from mines is not found suitable for direct use in production of Sponge Iron, and thus, after clearance of coal from mines, the appellant sends the same directly to the Coal washery for the purpose of washing. In the process of washing, there are certain losses in the quantity of coal. Thus, the appellant receives lesser quantity of good quality coal in its factory for use in the intended purpose. In the present case, during the course of verification of records by the Central Excise Audit wing, it was detected that in cases of 9 consignments, lesser quantity of coal have been received in the factory of the appellant, as compared to the invoiced quantity. The Revenue entertained the view that the short received coal was not used in the manufacture/ production by the Appellant, and hence, the appellant is not entitled for Cenvat credit for the short receipted quantity. Accordingly, Show Cause Notice was issued, seeking disallowance of cenvat credit to the extent of short receipted quantity of coal by the Appellant. The demand was confirmed by the adjudicating authority in denying the Cenvat credit on shortage of coal along with interest and penalty under Rule 15 of Cenvat Credit Rules, 2004 was also imposed on the appellant. In appeal, the ld. Commissioner (Appeals) vide the impugned order dated 06.12.2013 has upheld confirmation of the demand made in the adjudication order. Hence, this present appeal before this Tribunal.
2. Shri Manish Saharan, the ld. Advocate appearing for the Appellant submitted that in respect of the disputed 9 nos. of consignments, the coal procured from mines were not capable for use as such in factory of the appellant for manufacturing activity, as the same contained foreign materials like mud, dust, ash, etc.; that the supplier of coal M/s South Eastern Coal Fields, a Govt. of India Undertaking, while issuing the delivery order, had specifically mentioned that the coal has to be sent to the designated mines for washing; that where the coal is usable as such, the same were not sent for washing and whole quantity were received in the factory of the appellant; that the loss in weight occurred during the course of washing of coal should be considered as manufacturing loss and the duty paid on the purchased quantity of coal shall be eligible for Cenvat credit. In support of his above submissions, the ld. Advocate has placed reliance on the decision of this Tribunal in case of M/s Tata Motors Vs. CCE, JSR, reported in 2011 (264) ELT 385 (Tri.) and CCE, Mumbai Vs. Bharat Radiatiors Ltd., reported in 2002 (148) ELT 1101. He also placed reliance on the delivery order of M/s South Eastern Coal field, which bears the name of the washery as well as bills issued by the washery, showing the quantity of coal delivered after washing. He also stated that since all the documents and records were produced before the audit wing of the Central Excise Department, the charges of suppression or malafide intention for defrauding the Govt. Revenue cannot be leveled against the appellant, justifying imposition of penalty under Rule 15 of CCR Rules, 2004.
3. The Ld. Advocate also filed a written submission, reiterating his above submissions and also submitted that the Sponge Iron manufacturing process require specific quality of non-coking coal which should have high Fixed Carbon (FC) content (approximately 30%-40%) and low Ash content as much as possible (below 40% is better) to ensure reduction of the Iron ore. That most of the coal available in various collieries including Gevra & Dipka under South Eastern Coalfields Ltd., from whom the Appellant receives coal are of F grade having Ash content in tune of 46% & FC content in tune of 27%; therefore, such quality of coal cannot be used directly for the manufacturing of Sponge Iron and needs beneficiation & washing of coal to improve the FC content therein. That the Ash is unwanted content of Coal, which needs washing for improving the quality of coal. Washing helps in reducing ash content by 7% to 8%. That coal comprises of Fixed Carbon (FC)+ Ash + Volatile Matter(VM) and the FC & Ash are inversely proportionate. Coal washing is known as preparation, processing or beneficiation including crushing the coal. The most common way to wash the coal is by (usually magnetite-based) dense media separation, in which crushed raw coal is introduced into cyclones or a bath, where the heavier Shale & Stone in Coal falls to the bottom while the lighter coal floats and then is removed for drying. During the said washing process the weight loss may occur from 15% to 25% of the quantity based on requirement of FC/Ash. That the reason of determination of 80% yield of washed coal against Raw coal of Gevra mines from which Appellant purchased coal of -250mm, and it was based on quality of Raw coal available in the respective colliery, offer of the washery for Ash reduction & yield % as per bench mark/norms of the coal washery Industry. He also enclosed copy of certificate issued by Central Institute of Mining & Fuel Research, Bilaspur Unit (Council of Scientific & Industrial Research), Bilaspur (Chhattisgarh) working under Ministry of Science & Technology, Govt. of India, which clarifies that there is positive correlation between % of Ash reduction & loss of coal volume i.e. yield of washed coal. That as per the said certificate, on 1 % of Ash reduction in Coal, there is volume loss of approx. 2.5% which has been reflected in the table given in such certificate. That based on such certificate, for 8% Ash reduction, 20% volume loss of coal (8x2.5) was determined & accepted by both the Appellant and their Washery unit (Job worker). He also placed reliance upon the article of IEA Clean Coal Centre, which is a collaborative project of member countries of International Energy Agency to provide information about and analysis of coal technology, supply and use. That India and other countries are contracting and sponsor parties to said Agency. That the profile prepared by the said centre clearly states that the loss in coal washery accounts for 20 30% loss through the separation process for mineral matter from the coal. That it is absolutely clear that the loss occurred due to washing of coal is normal loss occurring during the process of manufacture and the Cenvat credit should be allowed.
4. On the other hand, Shri G.R. Singh, the Ld. D.R. appearing for the Revenue reiterated the findings recorded in the impugned order and further submitted that Cenvat credit has been rightly denied by the authorities, since the entire quantity of coal has not been received in the factory for use in, or in relation to manufacture of the Final product.
5. Heard the learned counsel for both sides and pursued the records.
6. I find that the demand pertains to the period April 2010 to January 2012. The SCN was issued on the basis of audit observation that in nine cases of procurement of coal, the quantity was short received on account of the loss associated with the washing of coal in coal washery. The revenue is of the view that since there was no short receipt in case of other consignments, the explanations offered by the Appellant is not convincing. I find from the delivery orders that while issuing the same to the Appellant, M/s SECL also mentioned therein the name of Coal washery M/s ACS (India) Ltd. CHAKABURA for processing of coal. The said Coal washery after undertaking the process of beneficiation of coal had charged service tax thereon and cleared the same to Appellant. The facts of the case are thus not much in dispute. It is an accepted fact that the coal was sent to Coal Washery for processing of coal so that it can be used in the manufacturing process. The loss of weight due to removal of ash content, mud, fines occurred due to such coal washing process has to be considered as arising during the course of manufacture of final product of the Appellant and credit has to be allowed to the Appellant. The revenue has sought to disallow the credit on the sole ground that in case of other consignments, the quantity was not found short. I find from the records that since the other consignments of coal were not sent for washing, there was no weight loss. However, since the disputed nine consignments were sent for washing, the loss in weight has occurred. Thus, I am of the view that the reasoning advanced by the revenue cannot be a defensible ground for disallowance of Cenvat credit. It is an undisputed fact that the coal was sent for washing and the loss in weight occurred due to its processing as apparent from the records of the Appellant. This records and facts has not been disputed by the revenue. I also find that the certificate issued by the Central Institute of Mining & Fuel Research, Bilaspur Unit (Council of Scientific & Industrial Research), Bilaspur (Chhattisgarh) working under Ministry of Science & Technology, Govt. of India clarifies that there is positive correlation between percentage of Ash reduction & loss of coal volume i.e. yield of washed coal and that on 1 % of Ash reduction in Coal there is volume loss of approx. 2.5%. I also find that as per IEA Clean Coal Centre of International Energy Agency loss in coal washery accounts for 20 30% loss through the separation process for mineral matter from the coal. In such view of undisputed facts as well as submission of the Appellant, I am of the opinion that the reasons canvassed by the revenue for disallowing cenvat credit is not sustainable. I also find that there is no ground to impose penalty under Rule 15 of the Cenvat Credit Rules, 2004 as the demand is itself not sustainable. Further in SCN, no facts have been brought on record which can show the malafide intention or suppression on the part of the Appellant. I, therefore, hold that the penalty imposed on the appellant is also not sustainable.
7. In view of my above observations, I hold that the impugned order is not sustainable, and hence, the same is set aside and the appeal is allowed in favour of the appellant with consequential relief, if any, as per law.
[Pronounced in the Open Court on 22.01.2016] (S.K. MOHANTY) MEMBER (JUDICIAL) Anita ??
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