Custom, Excise & Service Tax Tribunal
M/S The Andhra Sugars Ltd vs Cce, Guntur on 26 September, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Bench SMB Court I Appeal No. E/21568-21570, E/21573 & 21923-21924/2015 (Arising out of Order-in-Appeal No. GUN-EXCUS-APP-021-15-16, O-in-A No. GUN-EXCUS-APP-019-15-16, O-in-A No. GUN-EXCUS-APP-020-15-16 & O-in-A No. GUN-EXCUS-APP-018-15-16 dt. 27.04.2015 O-in-A No. GUN-EXCUS-000-APP-078-15-16 & O-in-A No. GUN-EXCUS-000-APP-079-15-16 dt. 04.08.2015 passed by CC, CE & ST (Appeals), Guntur) For approval and signature: Honble Ms. Sulekha Beevi, C.S., 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 Lordship wish to see the fair copy of the Order? 4. Whether Order is to be circulated to the Departmental authorities? M/s The Andhra Sugars Ltd., ..Appellant(s) Vs. CCE, Guntur ..Respondent(s)
Appearance Sh. N. Anand, Advocate for the Appellant.
Sh. Guna Ranjan, Superintendent (AR) for the Respondent.
Coram:
Honble Ms. Sulekha Beevi, C.S., Member (Judicial) Date of Hearing: 26.09.2016 Date of Decision: 26.09.2016 FINAL ORDER No._______________________ [Order per: Sulekha Beevi, C.S.] The issue involved in all these appeals being the same, they were heard together and are disposed by this common order.
2. Brief facts:
The appellants manufacture several excisable goods which interalia, includes Sulphuric Acid classifiable under Central Excise Tariff Heading 2807 00 10 of the First Schedule to the Central Excise Tariff Act, 1985. The above final product i.e. Sulphuric Acid is dutiable and generally on clearance of the said final product the Appellant is discharging central excise duty as applicable. The Appellant has also been clearing Sulphuric Acid to various manufacturers of fertilizers who are entitled to procure sulphuric acid duty-free by following the procedure prescribed under erstwhile Chapter X Procedure as contained in Central Excise Rules, 1944 which is replaced during 2001 in terms of procedure prescribed under the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001. Thus, the Appellant has been clearing Sulphuric Acid both on payment of duty as well as duty-free by following the procedure prescribed in the above rules to certain manufacturers of fertilizer. For manufacture of Sulphuric Acid, the Appellant procures input i.e. Sulphur and Vanadium Pentoxide (V205) catalyst which is duty paid and also receives certain input services such as handling and/or GTA service used for inward transportation of above input. The Appellant has availed the benefit of CENVAT credit of eligible/specified duties in respect of Sulphur and certain input services which were used for manufacture of Sulphuric Acid as stated above.
3. The department issued show cause notice inter alia, alleging that appellant has been using common input and input services in the manufacture of exempted goods as well as dutiable goods without maintaining separate accounts as envisaged under Rule 6(2) of CENVAT Credit Rules, 2004 and thereby is liable to pay amount of 10% of the value of exempted goods (i.e. value of Sulphuric acid cleared under chapter X procedure). The details of the period involved in show cause notices, the demand etc as put forward by appellant is as given below:
Appeal Ref Period Involved OIO Ref.
OIA Ref.
Amount demanded u/r 6(3)(i) of CCR Penalty E/21568/2015 September 2011 to June 2012 07/2013 dated 30.01.13 21/2015-16 dated 27.04.15 7,78,014 7,78,014 E/21569/2015 July 2010, November 2010 to March 2011 80/2012 dated 12.06.12 19/2015-16 dated 27.04.15 8,37,277 4,00,000 E/21570/2015 April 2011 to January 2012 134/2012 dated 31.07.12 20/2015-16 dated 27.04.15 14,64,997 14,64,994 E/21573/2015 June 2008 79/2012 dated 12.06.12 18/2015-16 dated 27.04.15 13,55,077 13,55,077 E/21923/2015 February 2012 to November 2012 55/2013 dated 29.10.13 78/2015-16 dated 04.08.15 3,88,348 97,000 E/21924/2015 January 2013 to March 2013 37/2014 dated 02.12.13 079/2015-16 dated 04.08.15 3,88,348 97,000 64,57,854 57,29,226
4. The Ld. Counsel for appellant Shri. N. Anand submitted that the sulphuric acid cleared by the appellant without payment of duty (under chapter X procedure) cannot be considered as an exempted good and therefore the said provisions of Rule 6 are not applicable. He submitted that the issue is covered and relied upon the following judgements:
i. Aureola Chemicals Ltd V/s CCE, Indoor [2004 (175) ELT 148 (Tri.-Del) ii. Zinc Ltd V/s Union of India [2008 (223) ELT 149 (Raj)] iii. UOI V/s. Hindustan Zinc Ltd., [2014 (303) ELT 321 (SC)] iv. CCE, Madurai V/s DCW Ltd., [2009 (234) ELT 163 (Tri.-Chennai)] v. CCE, Tirunelveli V/s. DCW [2011 (274) ELT 183 (Mad)] vi. Tristar Equipment (P) Ltd., V/s CCE, Nashik [2016-TOIL-447 (CESTAT- Mum)] vii. Dharamsi Morarji Chemicals Co. Ltd V/s. CCE, Raigad [2010 (255) ELT 314 (Tri Mum)] viii. CCE, Vapi V/s Advance Surfactants India Ltd., [2008 (88) RLT 275 (CESTAT Ahmd)] ix. CCE, Indore, V/s S.R.F Ltd., [2008 (223) ELT 508 (Tri-Del)] x. Commissioner V/s SRF Ltd., [2010 (255) ELT A13 (S.C)]
5. On behalf of the department, the Ld. AR, Shri. Guna Ranjan defended the findings in the impugned order. He submitted that the erstwhile 57CC is entirely different from Rule 6(1) of CENVAT Credit Rules, 2004 and therefore the decisions cited by the appellant are not applicable. Further that, since the final products are cleared without payment of duty under chapter X procedure, the credit availed on the inputs have to be reversed or the appellant is liable to pay 10% of the value of goods cleared without payment of duty.
6. I have heard both sides. The issue whether provisions contained in Rule 6 (2) of the CENVAT Credit Rules, 2004 is applicable in cases when the sulphuric acid is cleared by appellant under chapter X procedure without payment of duty is no longer res integra. The issue has been analysed in various judgements and the same has been decided in favour of the assessee.
7. In Aureola Chemicals Ltd V/s. CCE, Indore [2004 (175) ELT 148 (Tri-De) the Tribunal held that the spent Sulphuric Acid cleared by assessee under Chapter X procedure to various manufacturers of fertilizers against CT-2 certificate without payment of duty are not exempted goods. The Tribunal in said case observed as under:
8. The? appellants were clearing the Spent Sulphuric Acid under Chapter X Procedure to various manufacturers of fertilisers against CT-2 Certificate. As per the provisions of Rule 192 of Chapter X Procedure of Central Excise Rules where the Central Government by Notification sanctioned the remission of difference in respect of excisable products used in a specified industrial process any person wishing to obtain remission of duty on such goods, shall make application to the Commissioner stating therein their requirements and purpose and the Commissioner on his satisfaction allowed the appellant to receive the goods on conditions without payment of duty. The obligation is on the receiver of such goods to use the same in a specified industrial process. In case, the goods received under this procedure were not used for specified industrial process, the person who receive the goods is liable to pay the duty hence the goods cleared under Chapter X Procedure are neither exempted nor said to be chargeable to Nil duty.
?9.The provisions of Rule 57CC of the Central Excise Rules, provides where a manufacturer is engaged in the manufacture of final product which is chargeable to duty as well as which is exempted from the whole of the duty of excise or chargeable to Nil rate of duty and manufacturer is taking credit on the duty paid on inputs used in both type of products is to pay an amount equal to 8% of the price cleared at Nil rate of duty.
?10.As discussed above, the goods cleared under Chapter X Procedure are neither exempted goods nor said to be chargeable to Nil rate of duty as the recipient of the goods are duty bound to use these goods for specified purpose and, if, the goods are not used for specified purpose, goods are liable to duty. In this situation, the goods cleared under Chapter X Procedure cannot be said to be exempted from whole of the duty or are chargeable to Nil rate of duty. In view of the above discussion, the impugned order is set aside and the appeal is allowed.
8. In Hindustan Zinc Ltd V/s. UOI [2008 (223) ELT 149 (Raj)] the Honourable High Court of Rajasthan had occasion to consider whether the legality of the demand raised on the ground that appellant failed to maintain separate accounts in respect of goods cleared on payment of duty and goods cleared under chapter X procedure without payment of duty. The Honourable Court observed as under:
21.?Significantly this provision postulates making of separate inventory and maintaining separate accounts at the time of receipts of inputs in the factory. Its significance lies in revealing that to attract above obligation, the chargeability of any end product manufactured by the manufacturer to the duty or its exemption from the whole of Duty or chargeability to Nil rate must be discernible at the time of receipt of inputs in the factory. When the entitlement to availing Modvat or Cenvat credit is to be determined, the period of such determination is not referable to a future date, when the end product leaves the factory. If at the time of receipt of the inputs in the factory, the goods manufactured by the manufacturer in question predictably cannot be said to be chargeable to the duty or exempted from duty or liable to charge at nil rate, the very maintenance of separate inventory would not apply and account for different products will not be possible nor such provision can be attracted depending on end course that may actually take place. In other words, the chargeability to duty on the final product being exempted from whole of the duty or excise leviable thereon or chargeable at the nil rate of duty have nexus with the date on which the manufacturer is entitled to avail credit of duties paid on such inputs used by him in the manufacture of his product. Such date is date of receipt of inputs in the factory.
9. In the present case, the appellant cleared the goods without payment of duty not because the goods were per se exempted goods. Sulphuric acid is leviable to excise duty. Only on following the procedure under chapter X does the appellant be eligible to clear the goods without payment of duty. Thus the exemption from payment of duty is based upon fulfillment of conditions by the appellant or the buyer. Therefore at the time of manufacture the appellant cannot ascertain with full confidence that the end product is exempted from duty. The exemption being contingent upon conditions, it cannot be said to warrant a situation to maintain separate accounts.
10. The Co-ordinate Bench of the Tribunal in the case of CCE, Indore Vs S.R.F Ltd., [2008 (223) ELT 508 (Tri-Del)] held the issue in favour of assessee. This order of the Tribunal was upheld by the Apex Court [2010 (255) ELT A13 (s.C.)] dismissing the civil appeal filed by department. Again, the Tribunal in the case of Tristar Equipment Private Ltd., (supra) relied upon the judgement passed in S.R.F. Ltd and held that the demand raised alleging that pre-fabricated construction and stationary pre-cooling equipments cleared without payment of duty on the strength of C.T-2 certificate are exempted goods is not sustainable.
11. The issue was analysed and held in favour of assessee in the case of Dharamji Morarji Co Ltd., (supra) following the proposition laid in the judgements discussed above. On going through the above judgments, I find that the issue stands covered in favour of the appellant. Following the same I hold that the demand is unsustainable. The impugned orders are set aside. The appeals are allowed with consequential reliefs, if any.
(Operative part of this order was pronounced in court on conclusion of the hearing) (SULEKHA BEEVI C.S.) MEMBER (JUDICIAL) Jaya.
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