Customs, Excise and Gold Tribunal - Bangalore
Hindustan Zinc Ltd. vs Cce on 22 September, 2004
ORDER S.L. Peeran, Member (J)
1. These 07 (seven) appeals arise from a common impugned Order-in-Appeal No 248 to 254/2000 (V) CE dated 03.11.2000. The issue involved in these appeals is as to whether the appellants are entitled to Modvat Credit in respect of LDO and FO used as fuel in the manufacture of Silver and Sulphuric Acid which was cleared at nil rate of duty.
2. Ld. Counsel appearing for the appellants submits that the Modvat credit is available to both the items even when they are cleared at nil rate of duty in view of the Tribunal judgment rendered in case of Commissioner of Central Excise, Tirunelveli v. Sudarsanam Spinning Mills - 2004 (166) ELT 461 (Tri. - Chennai). He furnishes the copy of the said Tribunal judgment. He submits that this citation follows the rulings rendered in the previous orders -
(i) Commissioner v. Rajapalayam Mills Ltd. - Final Order Nos 1021 - 1022/2003 dated 28-11-2003
(ii) Indore Steel & Iron Mills Ltd v. Commissioner - 2002 (147) ELT 611 9Tri.)
(iii) National Engg. Ind. Ltd v. Commissioner - 2002 (150) ELT 161 (Tri.)
(iv) Navasari Oil Products v. Commissioner - 2003 (107) ECR 22 (Tri.) He submits that the appeals are required to be allowed.
3. Ld. SDR appearing for the Revenue submits that the Tribunal has not looked into the provisions of Rule 57C(1) which clearly stipulates that the benefit of Modvat credit is not required to be given to the goods which were cleared without payment of duty. Therefore, he submits that the judgments referred to by the appellants are required to be re-considered. He further submits that the Rule 57C(3) does not bar for interpreting the Rule 57C (1). He submits that the Rule 57CC is independent to the other rules and when it is read independently with the other rules, then the Modvat credit is not required to be given to LDO and FO which were new in final products which were cleared at nil rate of duty. He submits that the rule 57C(2) deals with 57CC as well as rule 57C(1). Therefore he seeks for review of the order. He submits that the Larger Bench of the Tribunal in case of Kirloskar Oil Engines Ltd. v. CCE, Pune - 1994 (73) ELT 835 (Tribunal) has clearly denied the benefit of Modvat credit to the inputs used in final products which were cleared at nil rate of duty.
4. In this context, Ld. Counsel submits that the judgment of the Larger Bench of the Tribunal in case Kirloskar Oil Engines Ltd (supra) is not applicable to the facts of this case as in the present case, the issue pertains to availment of Modvat credit on fuels LDO and FO which is covered by different provisions of law.
5. We agree with the view of learned Counsel that the judgment in case of Kirloskar Oil Engines Ltd (supra) is distinguishable and does not pertain to the facts of this case. The aspects pertaining to the availment of Modvat credit on fuel when it is cleared for manufacture of duty paid as well as exempted goods have been considered in case of CCE, Tirunelveli v. Sudarsanam Spinning Mills - 2004 (116) ELT 461 (Tri. - Chennai). The text of the judgment is reproduced below -
"[Order]. - The Revenue is aggrieved with the Order-in-Appeal No. 75/2003, dated 29-5-2003 passed by the Commissioner of Central Excise (Appeals), Tirunelveli. The respondent-assessee are availing credit of duty paid on various inputs including LSHS and furnace oil under CENVAT Credit Rules, 2002. LSHS and furnace oil are used as inputs in HFO plant for the generation of electricity which in turn is used in the manufacture of both dutiable and ex-empted final products. The department issued show cause notice to deny the benefit of Modvat credit on these two items which are used as inputs in HSO plant for generation of electricity which was in turn used in the manufacture of both dutiable and exempted final products. However, the Commissioner (Appeals) after due consideration allowed the claim by relying on the judgment of the Tribunal rendered in the case of National Engg. Ind. Ltd. v. CCE, Jaipur [2002 (150) E.L.T. 161 (Tribunal) = 2002 (102) ECR 808] and that of Navsari Oil Products v. CCE, Surat reported in 2003 (107) ECR 22. The findings recorded by the Commissioner is extracted herein below :-
"I have carefully gone through the facts and circumstances of the case. The point to be decided in this case is whether the demand of duty of Rs. 1,92,664/- being the CENVAT credit availed is correct or not. The lower authority has held that as per the provisions of Rule 6 of CENVAT Credit Rules, 2002, (hereinafter referred to as "CCR 2002" for short), Cenvat Credit should not be allowed on such quantity of inputs which are used in the manufacture of exempted final products. The appellants are contending that Rule 6 of CCR 2002 is not applicable to them. They stated that as per Rule 6(1) of CCR 2002, the Cenvat credit shall not be allowed on such quantity of inputs which is used in the manufacture of exempted goods expect in the circumstances mentioned in sub-rule (2). In sub-rule (2) of Rule 6, it was stated that "Where a manufacturer avails of CENVAT credit in respect of any inputs, expect inputs intended to be used as fuel, and manufacture such final products which are chargeable to duty as well as exempted goods, then, the manufacturer shall maintain separate accounts for receipt, consumption and inventory of inputs meant for use in the manufacture of exempted goods and take CENVAT Credit only on that quantity of inputs which is intended for use in the manufacture of dutiable goods".
The appellants' main contention is that in sub-rule (2) of the Rule 6, it was mentioned that except inputs intended to be used as fuel, it will apply to those inputs which are used other than fuel.
Since they are using the inputs as fuel, the Rule 6 will not be applicable and they are eligible for the credit. I find force in their argument. In the case of Indore Steel & Iron Mills Ltd. v. CCE, Indore, the Hon'ble Tribunal vide Final Order No. A/176/2002/NB (SM), dated 4-2-2002, had held the following view :
"The appellants are availing Modvat credit on the use of furnace oil as fuel in their factory. They are manufacturing wire rods from billets. A part of the wire rods is cleared without payment of duty in terms of provisions of Rule 57F(4). The other part is cleared on payment of duty. The question is whether the appellants are required to reverse the Modvat credit/pay duty proportionate to the furnace oil used in the manufacture of wire rods cleared without payment of duty. The provisions of sub-rule (2) of Rule 57C are already spelt out in para 4 of above in this order. This sub-rule (3) of this Rule specifically provides the exclusion of sub-rule (2) in respect of the use of fuel. Further, in terms of the provisions of Rule 57CC(1) when common inputs are used by a manufacturer in the manufacture of duty paid as well as exempted goods, the manufacturer shall pay an amount equal to eight per cent of the price of the exempted goods. In this rule also, an exception is created for the fuel used as an input meaning thereby that when a manufactures a final product of products, a part of which is cleared without payment of duty, he will not be required to pay 8% of the price of such products cleared without payment of duty. A comprehensive and harmonious reading of the above provisions leads me to conclude that the rules have created an exception in respect of inputs used as fuel and neither any Modvat credit is required to be revered for such inputs used in the manufacture of final products cleared without payment of duty nor such final products are called upon to pay an amount @ 8% of their price".
The same view is expressed in the case of National Engineering Ind. Ltd. v. CCE, Jaipur reported in 2002 (102) ECR 808 (Tri.). In the case of Navsari Oil Products v. CCE, Surat reported in 2003 (107) ECR 22 where again the Tribunal has held that the Assessee is not liable to reverse the credit taken on furnace oil used for the generation of electricity and steam used in the manufacture of non-dutiable item also. In the present case, the appellants are using furnace oil/LSHS as a fuel in the manufacturing process of both duty paid and non-duty paid end products and since the fuel is specifically excluded from the operation of the provisions of Rule 6 of CCR, there is no recovery to be made from the appellants in respect of furnace oil/LSHS used by them in the manufacture of the goods cleared without payment of duty. Since they are eligible for credit, imposition of penalty and demand of interest are set aside.
In view of the above discussion, I allow the appeal and set aside the order passed by the lower authority."
2. Ld. Counsel states that this very finding in its entirety was also rendered in the case of CCE, Tirunelveli v. Rajapalayam Mills Ltd. and Ors. and the Revenue was aggrieved with the Commissioner's order. The Tribunal after due consideration by Final Order Nos. 1021 to 1022/2003, dated 28-11-2003 confirmed the findings of the Commissioner by holding that the citations are clearly applicable to the facts of the case. The Tribunal also noted the judgment of Indore Stell & Iron Mills Ltd. v. CCE, Indore rendered by Final Order No. A/176/2002/NB (SM), dated 4-2-2002 [2002 (147) E.L.T. 611 (T)]. Ld. Counsel submits that in view of this order confirming the identical order passed by the same Commissioner (Appeals), there is no merit in the appeal and Revenue's appeal be dismissed.
3. Ld. DR, Shri C. Mani reiterates the grounds of appeal. In the grounds of appeal, the Revenue states that the judgments relied have not been accepted by the department and therefore, they have filed this appeal.
4. On a careful consideration of the submissions, I notice that the ground taken by the Revenue to file the appeal is not satisfactory. Once the Tribunal has rendered the judgment, the same is binding on the authorities, unless it is stayed or reversed by the higher authority. Respectfully following the judgment cited including the Final Order Nos. 1021 to 1022/2003, dated 28-11-2003 rendered in the case of CCE, Tirunelveli v. Rajapalayam Mills Ltd and Ors., the impugned order is confirmed by rejecting the appeal filed by Revenue."
We are of the considered opinion that the judgment of the Tribunal rendered in case of CCE, Tirunelveli v. Sudarsanam Spinning Mills (supra), following the ratio of other judgments, would apply to the facts of this case. Respectfully following the ratio of the aforesaid judgment, the impugned order is set aside and the appeals are allowed with consequential relief is any.