Punjab-Haryana High Court
Commissioner Of Central Goods And ... vs M/S Barmalt India Private Limited on 19 December, 2017
Author: Ajay Kumar Mittal
Bench: Ajay Kumar Mittal, Amit Rawal
CEA No. 35 of 2017 1
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
CEA No. 35 of 2017
Date of decision: 19.12.2017
Principal Commissioner of Central Goods and Service Tax (Earlier
Known as Central Excise, Gurgaon-I), Gurugram, Plots No. 36-37,
Sector-32, Gurgaon.
......Appellant
Vs.
M/s Barmalt India Private Limited
.....Respondent
CORAM: HON'BLE MR. JUSTICE AJAY KUMAR MITTAL
HON'BLE MR. JUSTICE AMIT RAWAL
Present: Mr. Saurabh Goel, Senior Standing Counsel for the
appellant-revenue.
Ajay Kumar Mittal,J.
1. This appeal has been preferred by the appellant-revenue under Section 35G of the Central Excise Act,1944 (in short, "the Act") against the impugned order dated 11.01.2017, Annexure A-4, passed by the Customs, Excise & Service Tax Appellate Tribunal, Chandigarh Bench (in short, "the Tribunal") in Appeal No. E/1506/2011, claiming following substantial questions of law:-
(i) "Whether in the facts and circumstances of the case, the Tribunal has committed a grave error of law in allowing the appeal of the respondent ignoring the provisions of Rule 6 of Cenvat Credit Rules, 2004 for clearance of excisable by-products arisen during manufacturing process cleared for consideration from factory?
(ii) Whether in the facts and circumstances of the case, the Tribunal has committed a grave error of law in holding that the appellant is not liable to pay 10% of the total 1 of 4 ::: Downloaded on - 07-01-2018 06:23:18 ::: CEA No. 35 of 2017 2 value of the said excisable goods cleared at "NIL" rate of duty and allowing the appeal with consequential relief?
2. A few facts necessary for adjudication of the controversy involved, as narrated in the appeal, may be noticed. The respondent-
assessee is engaged in manufacturing of Malt and Malt extract. It is availing Cenvat Credit on inputs, capital goods and input services. During the course of manufacturing of the said products, certain waste is generated that is called Chhilka, Dundli, Bhushi and Sprout which attract nil rate of duty. A.G.(Audit) Chandigarh while conducting audit of the party pointed out that during the manufacture of Malt & Malt Extract, other products like Chhilka, Bhusa and Sprouts falling under CETH 2301 attracting nil duty are also produced. They also pointed out that the party manufactured and cleared Malt, Malt Extract, Chhilka, Bhusa, Dundali and Sprouts using enzymes formaldehyde, manufact caustic soda, flakes etc. on which Cenvat Credit has been availed by it. The respondent assessee cleared Malt & Malt Extract on payment of applicable duty and Chhilka, Bhusa, Dundali and Sprouts at nil rate of duty. The assessee produced and cleared dutiable as well as exempted products using inputs on which Cenvat Credit has been availed without maintaining separate accounts for receipt, consumption and inventory of input and/or input service as prescribed under Rule 6(2) of Cenvat Credit Rules, 2004 (in short, "the Rules"). The assessee cleared exempted products valued at ` 2,32,09,621/- at nil rate of duty during the period from February 2008 to September 2008 and failed to pay an amount equal to 10% of the total value excluding sales taxes in terms of Rule 6(3) of the Rules. Accordingly, show cause notice dated 8.3.2009, Annexure A.1 was issued 2 of 4 ::: Downloaded on - 07-01-2018 06:23:19 ::: CEA No. 35 of 2017 3 to the respondent-assessee. The said show cause notice was adjudicated vide order dated 3.2.2010, Annexure A.2, confirming the demand of ` 23,20,963/- alongwith penalty of equal amount and interest at applicable rates. Aggrieved by the said order, the respondent assessee filed an appeal before the Commissioner (Appeals). Vide order dated 18.4.2011, Anenxure A.3, the Commissioner (Appeals) rejected the appeal filed by the party and upheld the order dated 3.2.2010. Still not satisfied, the respondent assessee filed an appeal before the Tribunal. Vide order dated 11.1.2017, Annexure A.4, the Tribunal allowed the appeal filed by the respondent assessee with consequential relief, if any. Hence the instant appeal by the appellant-revenue.
3. We have heard learned counsel for the appellant-revenue.
4. Admittedly, the respondent-assessee is engaged in the manufacturing of Malt and Malt extract. It is availing Cenvat Credit on inputs, capital goods and input services. During the course of manufacturing of said products, certain waste is generated that is called chhilka, dundli, bhushi and sprout which attract nil rate of duty. According to the appellant-revenue, as the assessee manufactures both dutiable as well as exempted final products, it is required to pay 10% of the value of exempted goods as per Rule 6(3) of the Rules. Accordingly, a show cause notice was issued to the assessee which was adjudicated by the appropriate authority and a demand of 10% of the value of the exempted goods was confirmed alongwith interest and equivalent penalty. The appeal filed by the assessee before the Commissioner (Appeals) was dismissed. However, the Tribunal relying upon the decisions of the Bombay High Court in Hindalco Industries Limited vs. Union of India, 3 of 4 ::: Downloaded on - 07-01-2018 06:23:19 ::: CEA No. 35 of 2017 4 2015(315) ELT 10 (Bom.) and Allahabad High Court in Balrampur Chini Mills Limited vs. Union of India, 2014(300) 372 (All.), held that for the by-products i.e. chhilka, dhundli, bhushi and sprout emerging during the manufacturing of malt and malt extract, the assessee is not liable to pay 10% of the value of the said goods. In Balrampur Chini Mills Limited's case (supra), it was held by the Allahbad High Court that Bagasse emerged as waste/intermediary/by-product during crushing of sugarcane for manufacture of final product sugar. There was no manufacture of exempted goods though it was marketable product but duty could not be imposed on it as there was no manufacturing activity. Hence as there was no manufacture of both dutiable goods as well as exempted goods, Rules, 6(1), 6(2), and 6(3) of the Rules were not applicable. Similar was the position in Hindalco Industries Limited's case (supra) wherein it was recorded by the Bombay High Court that waste and scrap emerge as a by-product in the course of manufacture of other products and were, therefore, not excisable.
5. Learned counsel for the appellant-revenue has not been able to controvert the applicability of the decisions rendered by the Bombay and Allahabad High Courts in Hindalco Industries Limited and Balrampur Chini Mills Limited's cases (supra) relied upon by the Tribunal. Consequently, no substantial question of law arises and thus, the appeal stands dismissed.
(Ajay Kumar Mittal)
Judge
December 19, 2017 (Amit Rawal)
'gs' Judge
Whether reportable Yes
Whether reasoned/speaking Yes
4 of 4
::: Downloaded on - 07-01-2018 06:23:19 :::