Gujarat High Court
The Commissioner, Cgst And Central ... vs M/S Philip Carbon Black Ltd. on 27 February, 2020
Author: J.B.Pardiwala
Bench: J.B.Pardiwala, Bhargav D. Karia
C/TAXAP/58/2020 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 58 of 2020
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THE COMMISSIONER, CGST AND CENTRAL EXCISE
Versus
M/S PHILIP CARBON BLACK LTD.
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Appearance:
MR ANKIT SHAH(6371) for the Appellant(s) No. 1
RAHUL L GAJERA(9399) for the Opponent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 27/02/2020
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA)
1. This Tax Appeal under Section 35G of the Central Excise Act, 1944 (for short the "Act1944") is at the instance of the Revenue and is directed against the order dated passed by the Customs, Excise & Service Tax Appellate Tribunal, Principal Bench Bench at Ahmedabad (for short 'CESTAT') dated 01.08.2018 in the Appeal No.E/12768/2014.
2. The Revenue has proposed the following two questions of law for the consideration of this Court: "16.A Whether, in the context of the facts in the circumstances of the case, the CESTAT was justified in holding that Cenvat credit on inputs and input services used in the power plant, can be availed by the respondent, to the extent the electricity supplied to the different Page 1 of 8 Downloaded on : Mon Jun 15 15:21:59 IST 2020 C/TAXAP/58/2020 ORDER units, beyound their factory premises?
B. Whether, the CESTAT was justified in not relying the case of M/s. Sintex Industries Ltd., reported at 2013(287)ELT 261 (Gujarat), M/s.Maruti Suzuki Ltd. Vs. Commissioner of Central Excise, DelhiIII, 2009 (240) ELT 641 (S.C) and M/s Ultra Tech Cement Ltd versus CCE, Ahmedabad, reported in 2015(320)E.L.T. A259 (S.C.), wherein the facts are similar to the present case?"
3. We take notice of the fact that the Tribunal while allowing the appeal of the assessee relied upon its own order dated 09.04.2015 passed in the case of the very same assessee. Paragraph Nos.4 & 5 of the impugned order passed by the Tribunal reads as under: "4. We have carefully considered the submissions made by both the sides and perused the records. We find that very same issue in the appellant's own case has been decided by this Tribunal vide order dated 09.04.2015 as cited above wherein the coordinate Bench of this Tribunal passed the following order:
"The relevant facts of the case, in brief, are that the appellants are engaged in the manufacture of Carbon Black, classifiable under Chapter Heading 2803 00 10 of the Schedule to the Central Excise Tariff Act, 1985. The main input is Carbon Black Feed Stock (CBFS). During the process of manufacture of Carbon Black, Lean Gas is emerged as byproduct, which is used for generation of electricity. The electricity was partly used in the plant and partly sold.
2. According to the Revenue, electricity is exempted and therefore they are liable to pay the amount 8 %/10 % on value of the electricity under Rule 6 of the Cenvat Credit Rules. The Learned Advocate for the appellant, relied upon the following decision:Page 2 of 8 Downloaded on : Mon Jun 15 15:21:59 IST 2020
C/TAXAP/58/2020 ORDER
1. Hitech Carbon Vs. CCE, Allahabad 2003 (161) ELY 407 (Tri.Del).
2. Rallis India Ltd. Vs. UOI - 2009 (233) ELT 301 (Bom)
3. CCE, Vadodara 1 Vs. Sterling Gelatin 02011 (270) ELT.200 (Guj.)
4. UOI & Others Vs. Hindustan Zinc Ltd. Civil Appeal No.8621 of 2010 (SC)
5. Ballarpur Industries Ltd. Vs. CCE Nagpur -
2006 (205) ELT 483 (Tri.Mum)
3. The learned Authorized Representative for the Revenue attempted to distinguish the decisions of the Tribunal in the case of Hotech Carbon (supra) on the ground that the Lean Gas is ultimately used in exempted goods. We find that the Tribunal in the case of Hitech Carbon (supra) has discussed in detail this issue. For the purpose of proper appreciation of the case, the relevant portion of the decision of the Tribunal in the case of Hitech Carbon (supra) is reproduced below:
"We have considered the submissions of both the sides. It has not been disputed by the Revenue that offgases are generated as a result of cracking of CBFS and these gases are burnt. The Final product of the appellant is Carbon Black for manufacture of which inputs namely Carbon Black Seeds Stock is brought into the factory and the Modvat credit is availed of. The generation of "off gases" is nothing but a by product in the process of manufacture of Carbon Black. The definition of byproduct as referred to by the learned Senior Departmental Representative supported the view that the off gases are nothing but byproduct as the same has been generated incidentally in the production of something else that is carbon black. Rule 57D(1) of the Central Excise Rules at the relevant time provided that credit of specified duty shall not be denied or varied on the ground that part of Page 3 of 8 Downloaded on : Mon Jun 15 15:21:59 IST 2020 C/TAXAP/58/2020 ORDER inputs is contained on any waste, refuse, or by product arising during the manufacture of final product, or that the inputs have become waste in or in relation to the manufacture of the final product, whether or not such waste, refuse or byproduct is exempted from whole of the duty of excise leviable thereon or chargeable to nil rate of duty or is not specified as a final product under Rule 57A. It is thus apparent fro the provisions of Rule 57D(1) that the credit shall not be denied on the ground that part of the inputs is contained in a byproduct. It is also not in dispute that byproduct in the present matter namely, 'off gases' are burnt out which generate heat which in turn is used in the boiler to generate steam. No doubt the steam has been generated by the appellants as a conscious act but it cannot be claimed by the Revenue that any part of the inputs, that is CBFS or any other inputs which has gone into the manufacture of Carbon Black has been used in the manufacture of steam. For the purpose of applying the provisions of Rule 57C or Rule 57CC, it is the prerequisite that the inputs are used in the manufacture of products which are exempted from the whole of the duty of excise or is chargeable to nil rate of duty. The mere fact of using the off gases in the generation of steam will not tantamount to using the Modvatable inputs in the manufacture of exempted product that is steam. The Appellate Tribunal in the case of Aarti Drugs Ltd. Vs. Commissioner of Central Excise Mumbai III 2001 (136) ELT1099 (Tribunal)=2001 (45)RLT 213 has held that provisions of Rule 57CC would not apply in the case of byproduct.
It has also been observed by the Tribunal that by insertion of Rule 57CC, there was no intention to eliminate the benefit available under Rule 57D(1) to a byproduct. The marketability or otherwise of byproduct is not really an issue. The Tribunal again in the case of Gas Authority of India Ltd. (supra) observed that when a manufacture sets out to create a product out of certain raw materials, he not only creates the product, but also creates other goods which are refuse, waste or byproduct. The classification of goods into final products, by products, waste and refuse is mainly on commercial consideration and the Plan or manufacture". The Tribunal in Gas Authority of Page 4 of 8 Downloaded on : Mon Jun 15 15:21:59 IST 2020 C/TAXAP/58/2020 ORDER India Ltd. case after referring to definition of byproduct as given in Chamber's Dictionary and Webster's Compressed Dictionary has held that the lean has obtained by processing natural gas to remove propone and butane is nothing but a byproduct and the provisions of Rule 57CC were not applicable to lean gas and the benefit of Rule 57D was extended. Following the ratio of these decisions, we are also of the view that provisions of Rule 57CC would not be applicable to the steam in the present matter. Thus we set aside the impugned order and allow the appeal."
It is noticed that Hon'ble High Court of Bombay and Hon'ble High Court of Gujarat had also approved the views of the Tribunal.
4. In view of the above discussions, we set aside the impugned order. The appeal filed by the appellant is allowed with consequential relief.
5. In view of the above order, the issue is no longer resintegra, accordingly, following the ratio of above Tribunal order, we set aside the impugned order and allow the appeal."
4. We inquired with Mr.Ankit Shah, the learned advocate appearing for the appellant whether the Revenue has challenged the order dated 09.04.2015 passed by the Tribunal in the case of the very same assessee, who is here before us. Mr.Shah, pointed out that the Revenue has not thought fit to challenge the order passed by the Tribunal dated 09.04.2015 referred to in Paragraph No.4 of the impugned order.
5. Well if that be the position, then we see no good reason to look into the matter any further. Even otherwise, both the the questions of law, as proposed by the Revenue are squarely covered by the decision of this Court in the case of Commissioner of C.Ex & Page 5 of 8 Downloaded on : Mon Jun 15 15:21:59 IST 2020 C/TAXAP/58/2020 ORDER Customs, VadodaraI Vs. SerlingGelatin [2011 (270) ELT 200 (Guj.)], wherein the same questions of law, as proposed in the present appeal were considered. While answering the questions of law against the Revenue, this Court observed as under: "10. In the facts of the present case, it is not as if by using a smaller quantity of input Hydrochloric Acid, the respondent could have averted the emergence of Mother Liquor. In other words, in the technology utilized by the respondent for the manufacture of Gelatin, the emergence of Mother Liquor was inevitable. Hence, while it is no doubt correct to say that Hydrochloric Acid has been used in or in relation to manufacture of Mother Liquor, the identical quantity of the same goods has simultaneously been used in the manufacture of Gelatin. The emergence of Mother Liquor during the course of manufacture of Gelatin, therefore, by itself is not a ground to invoke the provisions of rule 6 of the Rules.
11. Under the Scheme of the Central Excise Act and the Rules framed thereunder, credit of the duty paid on inputs used in the manufacture of dutiable goods is given under the Cenvat Credit Rules so as to prevent the cascading effect of duty. Cenvat Credit is availed in respect of duty paid on the inputs used in the manufacture of final product. At the time of clearance of the goods, the amount of credit being availed would be used for the payment of excise duty. Thus, the credit availed at the first stage would stand recovered at the time of clearance of the exportable goods. In the facts of the present case, Cenvat Credit would have been availed in respect of the input Hydrochloric Acid. The entire Hydrochloric Acid having been used for the manufacture of excisable goods being Gelatin, the credit availed in respect of the inputs would be duly recovered at the time of clearance of the excisable goods being Gelatin. If, as contended on behalf of the revenue, the respondent would be liable to pay a percentage of the cost of the final exempted product being Di Calcium Phosphate, the respondent would be required to pay duty in respect of the same input utilized by Page 6 of 8 Downloaded on : Mon Jun 15 15:21:59 IST 2020 C/TAXAP/58/2020 ORDER it twice over, which would apparently result in unjust enrichment to the revenue.
12. On behalf of the appellant it has been submitted that common input Hydrochloric Acid was used in the manufacture of both Gelatin as well as DiCalcium Phosphate hence, in the light of the provisions of rule 6(2) of the Cenvat Credit Rules, 2002, the respondent was required to maintain separate accounts for receipt, consumption and inventory of input meant for use in the manufacture of dutiable final products and the quantity of input meant for use in the manufacture of exempted products and take cenvat credit only on that quantify of input which was intended for use in the manufacture of dutiable goods. In the present case, the assessee has taken cenvat credit only on that quantity of input, which was intended for use in the manufacture of dutiable goods, therefore, also the question of invoking sub rule (2) of Rule 6 of the Rules would not arise.
13. Insofar as reliance placed upon the decision of the Bombay High Court in the case of Commissioner of Central Excise, Thane - 1 vs. Nicholas Piramal (India) Ltd. (supra) is concerned, the same would have no applicability to the facts of the present case inasmuch as in the facts of the said case, common input had been consciously used in the manufacture of two final products, whereas in the facts of the present case, the input Hydrochloric Acid is used for the manufacture of Gelatin alone, however during the course of manufacturing process a byproduct viz. Mother liquor also emerges.
14. In the light of the view taken by the Court, it is immaterial as to whether or not the new applicable rules, viz., Cenvat Credit Rules, 2002/2004 contain any provisions akin to Rule 57CC and Rule 57D of the erstwhile Central Excise Rules, 1944.
15. For the reasons recorded hereinabove, this Court does not find any legal infirmity in the impugned order of the Tribunal so as to warrant interference. No question of law, much less a substantial question of law can be stated to arise out of the impugned order of the Tribunal. The appeal is, accordingly, dismissed."
Page 7 of 8 Downloaded on : Mon Jun 15 15:21:59 IST 2020C/TAXAP/58/2020 ORDER 6. We also take notice of the fact that the decision of this Court referred to above in the
Stering Gelatin has been upheld by the Supreme Court vide order dated 18.09.2014 passed in the Civil Appeal Nos. 30353036 of 2011 with Civil Appeal Nos. 5879 & 8327 of 2011, 2104 of 2012 & 92279235 of 2014.
7. In view of the aforesaid decisions, the two questions of law, as proposed by the Revenue cannot be termed as substantial questions of law. The appeal fails and is hereby dismissed.
(J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) GIRISH Page 8 of 8 Downloaded on : Mon Jun 15 15:21:59 IST 2020