Custom, Excise & Service Tax Tribunal
Cce, Trichy vs M/S. Tamil Nadu Newsprint on 5 March, 2008
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
E/828/2005
(Arising out of Order-in-Appeal No. 101/2005 dated 15.07.2005, passed by the Commissioner of Customs & Central Excise (Appeals), Trichy)
For approval and signature
Honble P.KARTHIKEYAN, Member (Technical).
_______________________________________________
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CCE, Trichy : Appellant
Vs.
M/s. Tamil Nadu Newsprint : Respondents
and Papers Ltd., Karur Appearance Shri M.K.A.K. Mohiddin, JDR for the appellant Shri M.N. Bharathi, Adv., for the respondents CORAM Shri P. KARTHIKEYAN, Member (Technical) Date of hearing : 05.03.08 Date of decision : 05.03.08 Final ORDER No.________/2008 This appeal has been filed by the Revenue. The impugned order had vacated the order of the original authority and allowed the appeal filed by the respondents. During the period 1.11.03 to 31.10.04 M/s. Tamil Nadu Newsprint and Papers Ltd. (TNPL), had utilized furnace oil in the manufacture of their final products writing paper and newsprint. Newsprint is exempt from payment of duty. TNPL uses furnace oil for generation of electricity used in the manufacture of both dutiable and exempted final products. The original authority demanded an amount of Rs.2,99,734/- relatable to the exempted final products newsprint cleared during the material period. He found that Rule 6 (2) of the Cenvat Credit Rules, 2002/2004 (CCR) did not apply to inputs used as fuel and therefore, no separate accounts of receipt, issue and inventory were required to be maintained in terms of the said rule. He found that Rule 6 (1) of CCR applied in the instant case and TNPL was required to reverse the credit of duty paid on the input furnace oil relatable to newsprint cleared by it during the material period. Accordingly, he demanded Rs.2,99,734/-, interest thereon and imposed penalty of Rs.10,000/-. In the impugned order, Commissioner found that Rule 6 (2) of CCR did not apply to fuel such as furnace oil. Rule 6 (1) did not allow cenvat credit on such quantity of input used in the manufacture of exempted goods except in the circumstances, mentioned in sub-rule 2. As Rule 6 (2) regulated availment of credit on inputs used in the manufacture of dutiable and exempted final products, and Rule 6 (1) denied credit on inputs used in the manufacture of exempted goods except in the circumstances mentioned in sub-rule 2 the Commissioner (Appeals) decided that the assessee was not required to reverse credit availed on furnace oil. In passing the impugned order, the Commissioner followed the decisions of the Tribunal in M/s. Sudarsanam Spinning Mills Vs. CCE, Tirunelveli reported in 2004 (166) ELT 461 (Tri.-Chen.) and National Engineering Industries Ltd. Vs. CCE, Jaipur reported in 2002 (150) ELT 161 (Tri.). The first decision held that fuel being specifically excluded under Rule 6 (2) of CCR, 2002, the assessee was not liable to reverse credit taken on furnace oil/LSHS used for the generation of electricity used in manufacture of dutiable final goods. The second decision was to the effect that operation of Rule 57C and 57CC did not apply to use of common input LPG as fuel and no recovery was necessary on the ground that part of LPG was used in the manufacture of exempted goods.
2. Heard both sides.
3. I have carefully studied the submissions. In CCE, Tirunelveli Vs. Rajapalayam Mills Ltd., [F.O.No. 1021-1022/2003 dated 28.11.03], the Tribunal upheld in toto the following findings of the Commissioner (Appeals) in the order impugned in the appeal before them.
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 of 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 except 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, except 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 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. Vs. CCE, Indore, the Honble Tribunal vide Final Order No. A/176/2002/NB (SM) dated 04.02.2002, 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. The 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 percent 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 manufacturer avails Modvat credit on an input used as fuel and 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 reversed 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. Vs. CCE, Jaipur reported in 2002 (102) ECR 808 (Tri.). In the case of Navsari Oil Products Vs. 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. Following the ratios of the above decisions of the Tribunal, I find the appeal filed by the Revenue devoid of merit. Accordingly the appeal is dismissed.
(Operative part of the order pronounced in the open Court on 05.03.08) (P.KARTHIKEYAN) MEMBER (T) BB 2