Custom, Excise & Service Tax Tribunal
M/S. Salasar Sponge & Power Ltd vs C.C.E., Raipur on 10 August, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST BLOCK NO.2, R.K. PURAM, NEW DELHI 110 066. Date of Hearing: 03.08.2016 Date of Pronouncement : 10.08.2016 For Approval &Signature : Honble Mr. Justice (Dr.) Satish Chandra, President Honble Mr. V. Padmanabhan, Member (Technical) 1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3. Whether Lordships wish to see the fair copy of the order? Seen 4. Whether order is to be circulated to the Department Authorities? Yes Appeal No.E/2540/2009-EX[DB] [Arising out of Order-in-Original No.Commissioner/RPR/79/ 2008, dated 24.09.2008 passed by C.C.E., Raipur] M/s. Salasar Sponge & Power Ltd. Appellant Vs. C.C.E., Raipur Respondent
Appearance Mr. K.K. Anand, Advocate - For Appellant Mr. G.R. Singh, DR - For Respondent CORAM: Honble Mr. Justice (Dr.) Satish Chandra, President Honble Mr. V. Padmanabhan, Member (Technical) Final Order No.52987/2016, dated 10.08.2016 Per: Mr. V. Padmanabhan :
The present appeal has been filed against Order-in-Original dated 24.09.2008 passed by Commissioner of Central Excise & Customs, Raipur. The appellant is engaged in the manufacture of sponge iron falling under heading 7203 of the Schedule to the Central Excise Tariff Act, 1985. They were availing Cenvat credit on input and input services. They were also paying service tax on transportation of goods inputs as well as final products and were also availing Cenvat credit on such service tax. The demand made in the impugned order is to the extent of Rs.3,19,48,674/- along with interest and equal amount of penalty under Rule 6(3)(b) read with Rule 14 of Cenvat Credit Rules, 2004. This demand is made on two allegations.
(i) The appellant procured iron ore which is used as input in the manufacture of sponge iron, which is cleared on payment of duty. During the manufacture of sponge iron, there arises another product known as Iron Ore Fines, which is cleared without payment of duty because there is exemption from payment of excise duty. The appellant has availed Cenvat credit of service tax paid on GTA services paid for the transportation of iron ore to their factory. Since no separate accounts were maintained by them and the common input service (GTA) credit has been taken and used for dutiable final product (sponge iron) and exempted final product (iron ore fines), demand has been made for reversal of Cenvat credit at the rate of 10% of the value of the exempted products (iron ore fines) in terms of Rule 6 (3) of the Cenvat Credit Rules, 2004.
(ii) The appellant used coal as input used not only in the manufacture of sponge iron but also for generation of electricity in the captive power plant situated within the factory. A part of the electricity generated in the power plant was wheeled out to the Electricity Board. Electricity is classified under 27160000 against which no central excise duty is indicated in the tariff. Demand has been made under Rule 6 (3) of the Cenvat Credit Rules, 2004 at the rate of 10% of the value of the exempted goods (electricity wheeled out to Chhattisgarh Electricity Board).
2. The appellant challenged the impugned order mainly on the following grounds:-
(i) Iron ore fines is not a final product, which is exempted, but is a by-product which has emerged during the course of manufacture of sponge iron. Unintended by-products cannot be treated as final product and hence will not fall in the category of exempted goods. Consequently, there is no need to reverse 10% of the value of the exempted goods in terms of Rule 6 (3) ibid. They have cited the following case laws in their support:-
(i) Union of India Vs. Hindustan Zinc Ltd. [2014 (303) ELT 321 (SC)
(ii) Rallis India Ltd. Vs. Union of India [2009 (233) ELT 301 (Bom.)]
(iii) CCEST, Raipur Vs. Aarti Sponge & Power Ltd. [2016 (333) ELT 415 (Tri-Del)] On the second allegation regarding the electricity, they have argued that electricity cannot be considered as an excisable goods as defined in Section 2(b) of the Central Excise Act, 1944 in-as-much-as no rate of duty has been prescribed for electrical energy. The electricity cannot be categorised as exempted goods also since there is no exemption Notification granting such exemption. They have finally argued that there is no liability to pay 10% of the value of electricity wheeled out under Rule 6(3) of Cenvat Credit Rules, 2004.
3. However, they submitted that they have reversed the entire credit taken on the input services (GTA services) availed in connection with the transportation of coal, which has been used partly for manufacture of sponge iron and partly for generation of electricity. They have reversed an amount of Rs.12,03,926/- along with interest towards reversal of Cenvat credit on GTA for the disputed period. Accordingly, they have prayed that since the credit which was originally availed has been reversed, it has to be considered as not availed ab initio. In their support, they cited the following decisions:-
(i) Chandrapur Magnet Wires (P) Ltd. Vs. Collector of Central Excise, Nagpur [1996 (81) ELT 3 (SC)
(ii) CCE Vs. Ashima Dyecot Ltd. [2008 (33) ELT 580 (Guj)]
(iii) CCE Vs. Asian Fertilizers Ltd. [2015 (322) ELT 666 (All)].
4. We have heard Shri KK Anand, ld. counsel for the appellant and Shri GR Singh, ld. Departmental Representative for Revenue.
5. The appellant has used iron ore as the main input in the manufacture of sponge iron and have taken credit of service tax paid on input services (GTA). In the course of processing of iron ore, another product, iron ore fines emerged, which was cleared and sold without payment of duty since the same enjoyed exemption. It is not disputed that they have not maintained separate accounts for the use of common input services for dutiable and exempted products. In the impugned order, the Commissioner is of the view that the appellant had cleared two final products, i.e., one dutiable (sponge iron) and the other exempted (iron ore fines). For failure to maintain separate accounts, the appellant was held liable to pay 10% of the value of iron ore fines cleared in terms of Rule 6 (3) (b) of the Cenvat Credit Rules, 2004. Ld. counsel for the appellant cited the following case laws and has argued that there is no need for reversal of 10% in the case of waste or by-product:-
(i) CCE Vs. Solaris Chemtech Ltd. [2007 (214) ELT 481 (SC).
(ii) Ballarpur Industries Ltd. Ltd. Vs. CCE, Nagpur [2006 (205) ELT 483 (Tri.-Mum)] We have gone through the cited case laws. In the decision of Apex Court in the case of Union of India Vs. Hindustan Zinc Ltd. (supra), the Hon'ble Supreme Court has held that a distinction has to be made between final product as well as by-products. It was held that by-products cannot be held to be main final products. The court was examining the question of reversal in the context of Rule 57CC as well as Rule 6 of the Cenvat Credit Rules, 2004 and decided that for clearance of exempted by-products there will be no need for reversal of 8%/10% of the value of the exempted products. This decision of the apex court is squarely applicable in the present case in the case of iron ore fines. This Tribunal has also taken similar view in the subsequent decision in the case of CCEST, Raipur Vs. Aarti Sponge & Power Ltd. (supra). We find that the issue is no more res integra in-as-much-as the issue stands decided in favour of the appellant by the apex court.
6. Now, we turn to the second allegation regarding electricity. We find that this controversy can be decided without getting into the question of whether electrical energy is excisable goods or exempted goods. We find that the appellant has reversed the entire credit taken on input services, namely, GTA services in respect of transportation of coal, even though part of the coal was used in the manufacture of dutiable sponge iron. Hon'ble Supreme Court in the case of Chandrapur Magnet Wires (P) Ltd. Vs. Collector of Central Excise, Nagpur has held that if the credit originally availed is reversed subsequently it would amount to the effect as if no credit has been availed. Accordingly, we find no justification to demand 10% of the value of electricity wheeled out.
7. Ld. Departmental Representative during the hearing has raised the issue that in addition to the credit taken on GTA, appellant has availed credit to the extent of over Rs.2 crores on various other services as well. Accordingly, he has submitted that the entire demand cannot be waived on the basis of reversal of GTA services. We find from the impugned order that the appellant has availed Cenvat credit not only on GTA service but also on various other services such as cargo handling service, consulting engineering service, security service, telephone service, etc. It is easily seen that credit availed on service tax on transportation of coal is the only service on which credit can be said to have been taken where it is used for generation of electricity and the same has been reversed.
8. In the light of the above discussions, we find that the demand made in the impugned order cannot be upheld. Accordingly, the order is set aside and the appeal is allowed.
[Pronounced in the Open Court on 10.08.2016] (Justice Dr. Satish Chandra) President (V. Padmanabhan) Member (Technical) -9-