Customs, Excise and Gold Tribunal - Delhi
Universal Ferro And Allied Chemicals ... vs Commr. Of C. Ex. on 18 January, 2005
Equivalent citations: 2005(101)ECC124, 2005(183)ELT216(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. The issue involved in these four appeals filed by M/s. Universal Ferro & Allied Chemical Ltd. relates to disallowance of Modvat credit and confirmation of demand of Central Excise duty on slag.
2. Shri K. K. Anand, learned Advocate, mentioned that the Appellants manufacture Ferro Alloys and avail of Modvat Credit of the duty paid on inputs, carbon paste; that they manufacture high carbon ferro manganese, low carbon ferro manganese, medium carbon ferro manganese and Silico manganese; that during the manufacture of High Carbon Ferro Manganese, ferro manganese slag is generated which is used captively in the manufacture of Medium and Low Carbon Ferro Manganese; that some quantity of Silico manganese is also used captively in the manufacture of Medium/Low Carbon Ferro Manganese; that the slag and silico manganese were used captively without payment of duty availing the benefit of Notification No. 217/86-CE dated 2-4-86; that the Appellants also clear their finished goods at nil rate of duty in terms of Notification No. 91/88-CE, dated 1-3-1988 by following Chapter X Procedure; that the Assistant Commissioner disallowed the Modvat credit of duty paid on carbon paste on the ground that the finished goods were cleared without payment of duty; that the Assistant Commissioner also confirmed the demand of duty in respect of slag and silico manganese used captively in the manufacture of exempted final products; that the Commissioner (Appeals), under the impugned Order, rejected their appeals holding that the benefit of Notification No. 217/86-CE is not available as the final product is exempted from payment of duty and that the Modvat credit is also not available in terms of Rule 57C of the Central Excise Rules which provides that no credit of the duty paid on the inputs used in the manufacture of a final product shall be allowed if the final product is exempt from the whole of the duty or is chargeable to nil rate of duty.
3. The learned Advocate submitted that the Modvat credit is not-disallowable to the Appellants as admittedly the carbon paste is used in the manufacture of ferro alloys; that no doubt ferro alloys are cleared by them at nil rate of duty following the procedure prescribed under Chapter X of the Central Excise Rules, 1944, the ferro alloys are duly used in the manufacture of iron and steel products which are in turn cleared on payment of duty; that thus the input namely carbon paste is ultimately used in the final product which are cleared on payment of duty; that the Modvat credit could be denied only in a case where there is not a complete chain to show that the inputs have ultimately been used in the exempted goods. He relied upon the decision in the case of Escorts Ltd. v. C.C.E., Delhi - 2004 (171) E.L.T. 145 (S.C.) where it has been held by the Supreme Court that the provisions of Rule 57C would have no application, if the intermediate products are used in the manufacture of dutiable final product and the mere fact that intermediate products are cleared from one factory of the Appellants to another factory of the Appellants would not disentitle the Appellant from claiming benefit of Notification No. 217/86. Reliance has also been placed on the decision in the case if Finolex Industries Ltd. v. C.C.E., Pune - 2003 (57) RLT 210 (CEGAT) wherein it has been held that Credit of duty paid on inputs of intermediate product removed to another factory and used in the manufacture of dutiable final product is admissible. He has also relied upon the decision in the case of CCE, Indore v. SRF Ltd. - 2004 (60) RLT 743 (CEGAT) and CCE & C, Surat v. Reliance Industries Ltd. - 2004 (164) E.L.T. 118 (T) = 2004 (60) RLT 573 (CESTAT). Finally the learned Advocate submitted that if it is held that the Central Excise duty is payable by them on silico manganese the benefit of Notification No. 217/86 cannot be denied in respect of slag which is used in the manufacture of silico manganese captively; that similarly the Modvat credit cannot be denied to them in respect of carbon paste once the duty is held to be payable on silico manganese.
4. Countering the arguments Shri V. Valte, learned SDR, reiterated the findings as contained in the impugned Order and emphasized that the benefit of Notification No. 217/86 is available only if the goods are used in the manufacture of final product within the factory provided the final product is not exempt from payment of duty; that the iron and steel products are not manufactured in the factory of the Appellants and as such the benefit of Notification No. 217/86 cannot be extended to the Appellants.
5. We have considered the submissions of both the sides. Notification No. 217/86-C.E., dated 2-4-86 exempts goods manufactured in or in relation to the manufacture of final products subject to the condition that the final products are not exempt from whole of the duty of Excise leviable thereon or is not chargeable to nil rate of duty. It is thus apparent from the Notification that the benefit of Exemption contained therein will be available only if the final product is not exempt from payment of duty and the goods are used within the factory of production. It is not the case of the Appellants that the iron or steel products are used within their factory where silico manganese is manufactured. The decision in the case of Escorts Ltd. will not be applicable as the facts are different. Notification No. 217/86 was amended by Notification No. 97/89-C.E., dated 1-3-89 by which it was provided that the benefit of Notification will be available even if the goods are used in any other factory of the same manufacturer. In the case of Escorts Ltd. the parts of tractor were being cleared to the another factory of the same manufacturer for manufacture of tractor on which duty was paid. In the present matters it is not the case of the Appellants that iron and steel products are manufactured by them in their another factory. Accordingly the benefit of Notification No. 217/86 will not be available to the Appellants in respect of silico manganese, as the final products namely high carbon ferro manganese and low carbon ferro manganese are cleared without payment of duty availing the benefit of Notification No. 91/88-C.E. dated 1-3-88. As it is being held by us that Central Excise duty is payable on silico manganese Modvat credit of duty paid on carbon paste will not be disallowable. Similarly slag which is used in the manufacture of silico manganese will also be eligible for the benefit of exemption under Notification No. 217/86-C.E. as the same is used in the manufacture of silico manganese which is now being held by us to be chargeable to Central Excise duty. All the 4 appeals are disposed of in the above terms.