Custom, Excise & Service Tax Tribunal
M/S Vizianagar Biotech Ltd vs Cce, C & St, Visakhapatnam-I on 26 October, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Bench SMB Court I Appeal No. E/843/2008 & E/216/2009 (Arising out of Order-in-Appeal No. 100/2008 (V-I) CE dt. 28.08.2008 passed by CCE & C (Appeals), Visakhapatnam Order-in-Appeal No. 10/2009 (V-I) CE dt. 27.01.2009 passed by CCE, C & ST (Appeals), Visakhapatnam) 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 Vizianagar Biotech Ltd., ..Appellant(s) Vs. CCE, C & ST, Visakhapatnam-I ..Respondent(s)
Appearance Ms. A.S.K. Swetha, advocate for the appellant.
Sh. P.S Reddy, Assistant Commissioner (AR) for the respondent.
Coram:
Honble Ms. Sulekha Beevi, C.S., Member (Judicial) Date of Hearing: 06.10.2016 Date of decision: _________ FINAL ORDER No._______________________ [Order per: Sulekha Beevi, C.S.] The issue involved in both the appeals being the same they were heard together and are disposed by this common order. The issue involved whether appellant is eligible for CENVAT Credit availed on Capital goods when at the time of availing credit appellant was manufacturing only exempted product.
2. The brief facts put forward by appellant are as under:
a) The appellants are the manufacturers of the Final products Maize Starch falling under chapter sub-heading No. 1108.12.00, Yellow Dextrine falling under Chapter sub-heading No. 3505 10 90 and Thin Boiled Starch falling under Chapter sub-heading No. 3505 10 90.
b) Appellants started Manufacturing activity in the month of November 2005 and took Central Excise registration in the Month of November 2005 itself. During the first stage of manufacture appellants manufactured the final product Maize Starch which is exempted from payment of duty vide Notification No. 03/2006 CE dated 01.03.2006 (General Exemption No. 65). Appellants cleared the said product under chapter sub heading No. 1103 claiming NIL rate of duty.
c) Appellant received capital goods and availed CENVAT Credit of first 50% in the month of December 2005 and reflected the same in the ER 1 return for the said month. The details of CENVAT availed is tabulated below.
Month CENVAT availed First 50% in Rs December 2005 Rs. 16,18,522/- (Rs.15,86,777+Rs.31745 Cess) February 2006 Rs. 1,05,485/-
March 2006 1,62,672/-
Total Credit availed Rs. 18,86,679/-
d) Out of the final product Maize Starch, appellants utilized some quantity of Maize Starch and manufactured the other two final products of Yellow Dextrine and Thin Boiled Starch. The appellants started clearing the final products of Yellow Dextrine and Thin Boiled Starch in the Month of February 2006 on payment of duty.
e) Appellant utilized the said first 50% credit availed on capital goods for payment of duty on the clearances of Yellow Dextrine and Thin Boiled Starch.
f) First Show Cause Notice has been issued with an allegation that at the time of availing credit (December 2005), appellant manufactured only exempted product of Maize Starch which attracts Nil rate of duty. That the appellant manufactured dutiable products only from February 2006 onwards, and further that the percentage of dutiable product is very low (0.09% for Yellow Dextrine and 0.5% Thin Boiled Starch). That from this it is noticed that the capital goods are intended to be used by the manufacturer for exempted goods only and the availment of Credit was in contravention of sub-rule (4) of Rule 6 of CENVAT Credit Rules, 2004.
g) Appellant availed second 50% CENVAT Credit on the capital goods in the subsequent Financial Year and the Second Show Cause Notice was issued to the appellant on the same ground and the total credit disallowed in the said notice was Rs. 15,02,742/-.
h) The adjudicating authorities allowed the CENVAT Credit on capital goods received after February 2006 the date of which dutiable goods were cleared on payment of duty and disallowed the Credit on the capital goods which are received prior to the date of February 2006. The adjudicating authority as well as appellate authority while doing so relied upon on the decision in Surya Roshini case reported in [2003 (115) ELT 481] which was later affirmed by the Honble Supreme Court as reported in [2003 (158) ELT A 273 (SC)] which laid down the principle that the availability of MODVAT Credit is to be looked into at the time of receipt of the capital goods. If the goods are exclusively used in the manufacture of the exempted products, MODVAT Credit will not be available to the manufacturer. Subsequently, if the exempted product becomes dutiable on account of withdrawal of exemption notification or the manufacturer puts the capital goods to other use would not revive the question of MODVAT Credit which stands determined at the time of capital goods which was received and also placed reliance on M/s Spenta International Vs CCE, Thane reported in [2007 (216) ELT 133 (Tri-LB)].
The amounts of duty confirmed along with penalties imposed are tabulated as below.
OIA No Amount Confirmed Penalty Imposed Corr Appeal No 100/2008 (V-I) CE dated 28.08.2008 Rs.18,77,173/-
2,00,000/-
E/843/2008 10/2009(V-I)CE dated 27.01.2009 Rs. 13,58,074/-
1,30,000/-
E/216/2009
3. The Ld. Counsel Ms. A.S.K. Swetha appearing for appellant submitted that Rule 6 (4) of CENVAT Credit Rules, 2004 specifies that credit is not eligible on the capital goods which are used exclusively in the manufacture of exempted goods. The appellant availed credit in the month of December 2005 where as the appellant cleared the dutiable final products in the month of February 2006 (2 months gap). Again, appellant utilized their final exempted product viz; Maize Starch for the manufacture of dutiable product of Yellow Dextrine and Thin Boiled Starch. This fact has not been refuted by the revenue. The department ought to have considered the fact that without manufacturing the Maize Starch, the dutiable products would not emerge and in such a situation it cannot be concluded that the capital goods were used exclusively in manufacture of exempted product of Maize Starch. The judgment on which the adjudicating authority as well appellate authority relied on, M/s Surya Roshini case is distinguishable on the facts. That the said decision deals with admissibility of CENVAT Credit of duty paid on capital goods installed which were used in the production of non-dutiable goods at the time of receipt of such capital goods. Subsequently the goods in question therein become dutiable. In the present case, the facts are entirely different in as much as the appellant manufactures the dutiable products from the exempted product and accordingly the issue is to be decided that when the capital goods which are used in manufacture of both exempted final product as well as dutiable product whether the provision under sub-rule (4) of Rule 6 is applicable. The Ld. Counsel placed reliance on the following judgments where in it was held that when the capital goods are used for both exempted and dutiable products credit cannot be denied.
a) Commissioner of Central Excise, Aurangabad Vs M/s Pepsico India Holdings Ltd reported in [2015 (10) TMI 846 (CESTAT, Mumbai)]
b) Brindavan Beverages Pvt Ltd., Vs Commissioner of Central Excis., Meerut reported in [2014 (310) ELT 398 (Tri-Del)]
c) Commissioner of Central Excise, Bangalore Vs M/s Kailash Auto Builders Ltd., reported in [2012 (280) ELT 49 (kar)]
d) M/s Rana Sugar Ltd., Vs Commissioner of Central Excise, Ludhiyana reported in [2012 (11) TMI 299 (CESTAT, Delhi])
e) Commissioner of Central Excise, Vadodara-II Vs Gujarat Propack reported in [2009 (234) ELT 409 (Guj)]
4. The Ld. Counsel has also put forward arguments referring to Rule 9 of Central Excise Rules:
i) It is submitted that in terms of sub-rule (2) of Rule 9 of Central Excise Rules 2002 the Board may by notification and subject to such conditions and limitations as may be specified in such notification, specify person or class of persons who may not require such registration. The notification for this purpose issued is 36/2001 (CE) (NT) dated 26.06.2001 and as per this notification, the persons who manufacture the goods specified in the First Schedule to the Central Excise Tariff Act, 1985 which are chargeable to NIL rate of duty are exempted from the operation of Rule 9 of Central Excise Rules.
In this context she submitted before that if the appellant having intention to only manufacture the exempted goods viz Maize Starch, they would not have at all registered with the Central Excise department in the month of November 2005 for the reason that they are not at all required to take registration in terms of the above notification No. 36/2001 (CE) (NT) Dated 26.06.2001.
5. Further the appellant has taken registration for Excisable goods. It is no where mentioned that the appellant has taken registration only for Maize starch. Hence the intention of the appellant was very clear right from the beginning to manufacture both exempted as well dutiable products. The intention of the appellant was also very well established from the Memorandum of Association which was filed with Registrar of Companies at the time of incorporation of the company on 24.05.2004. She relied upon the objects clause of said MOA in which the main objects of the company on its incorporation is specified as below:
Point 3: To establish own, aquire or lease and to carry on the business as manufacturers, processors, traders of agro based products and other allied products such as Starch Glucose, Fructose, and Sorbital, Germ, Gluten, Aldehyudes, Acids, Ketones, Esters etc.,
6. In addition the Ld. Counsel urged that the terms maize starch, yellow dextrin, and Thin boiling starch are generally used terms in normal trade practice and the technical term for all these products is STARCH GLUCOSE. She drew support on a certificate issued by the Manager of Quality Assurance & Quality Control stating that from the raw material of Raw maize the resultant products are Starch glucose, gluten, germs and Fiber emerges and these products are listed in MOA in technical terms as detailed above and the Starch glucose further classified into Yellow Dextrin, Thin boiling and maize starch. From the above MOA it is also very clear that the company has been incorporated for the purpose of manufacture of so many products and not to manufacture only Maize Starch. Further she submitted that this Maize starch is the raw material for manufacture of Dutiable products of both Yellow Dextrin and Thin Boiling starch and that was the same stated in reply to the Show Cause Notices and that Revenue has not disputed this fact.
7. The Ld. AR Sh. P.S. Reddy reiterated the findings in the impugned order. He submitted that at the time of availing the 50% credit, the appellant was manufacturing only exempted product. The date of taking the credit has to be taken into consideration, to decide whether, the credit is admissible or not. He urged that the issue is covered by the Apex Court judgment laid in the case of M/s Surya Roshini.
8. I have heard both sides. For better appreciation, the relevant rule is reproduced as under:
Rule 6(4) of CENVAT Credit Rules, 2004 No CENVAT credit shall be allowed on Capital goods which are used exclusively in the manufacture of Exempted goods or in providing exempted services other than the final products which are exempt from the whole of the duty of excise leviable thereon under any notification where exemption is granged based upon the value or quantity of clearances made in a financial year.
9. On taking into consideration the fact that, at the time of availing credit, the appellant was manufacturing only exempted product, I have to agree that the contentions put forward by department holds merit. At the time of taking credit on capital goods i.e. December 2005 the appellant was manufacturing exempted product only. The Ld. Counsel for appellant has made a frail effort to rely upon sub-rule (2) of Rule 9 of Central Excise Rules, 2002 to canvass the proposition, that the appellant had taken Central Excise Registration, to manufacture of excisable goods, which would indicate that appellant had intention to manufacture dutiable goods later. Mere taking registration for manufacture would not make the appellants eligible to take credit on capital goods when the capital goods were exclusively used to manufacture exempted goods at the relevant time of taking credit. The crucial aspect to be considered is the use of the capital goods on the date on which credit is taken. Therefore the credit availed on capital goods in the month of December 2005 is not admissible. The judgments relied by the Ld. Counsel for appellant are not applicable to the issue under analysation as in the said judgments, the credit was held to be admissible when capital goods are used for manufacture of both exempted and dutiable products. The issue stands covered by the judgment laid by Honble Apex Court reported in [2003 (115) ELT 481]. The appellant has started manufacture of dutiable products only in February 2006. Therefore the credit is not admissible. The impugned orders are sustained.
10. In the result, the appeals are dismissed.
(Pronounced on ___________in open court) SULEKHA BEEVI C.S. MEMBER(JUDICIAL) Jaya.
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