Custom, Excise & Service Tax Tribunal
Reliance Industries Limited vs Commissioner Of Central Excise, Raigad on 5 December, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. Appeal No.E/1432/06 (Arising out of Order-in-Original No. 53/IDG(17)/RGD/COMMR(ADJ)/05-06 dt. 15/02/2006 passed by the Commissioner (Adjudication) Central Excise, Raigad ) For approval and signature: Honble Shri Ramesh Nair, Member (Judicial) Honble Shri Raju, Member (Technical) =======================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
=======================================================
Reliance Industries Limited
:
Appellant
VS
Commissioner of Central Excise, Raigad
:
Respondent
Appearance
Shri J.C. Patel, Advocate for Appellant
Shri V.K. Agarwal, Addl. Commr. (A.R) for respondent
CORAM:
Honble Shri Ramesh Nair, Member (Judicial)
Honble Shri Raju, Member (Technical)
Date of hearing : 05/12/2016
Date of pronouncement : 05/01/2016
ORDER NO.
Per : Ramesh Nair
The issue involved in this appeal is whether the Chemical viz. Sodium Silico Aluminate which is a Molecular Sieve used to extract N-Pharaffin from Kerosene for manufacture of Linear Alkyl Benzene (LAB) is an Input within the meaning of Rule 57A of the Central Excise Rules, 1944.
2. The adjudicating authority denied the Cenvat Credit holding that the Molecular Sieve were found to be used as packing of process vessel wherein these are used to separate hydrocarbons and other mixtures by selective occlusion of one or more of constituents, which is a process of sieving, employed for segregation if different fractions. Since these Molecular Sieve are used in the process vessel for considerable length of time, it falls in the category of equipment/appliance/apparatus for production/processing of goods/bringing about any change in any substance in or in relation to the manufacture of the final products. Since such equipment/appliance/apparatus are excluded from the expression inputs by explanation under Rule 57A, no Modvat credit is allowed under Rule 57A on the Molecular Sieve and process. Being aggrieved by the Order-in-Original dt. 15.2.2006. The appellant filed this appeal.
3. Shri J.C. Patel, Ld. Counsel appearing on behalf of the appellant submits the process of manufacture of LAB. He submits that it s used in the manufacture of LAB however it does not contain in the final product. He referred to the definition of input service wherein the input even though used indirectly and even if not contained in the final product it will be considered as input within the meaning under rule 57. He submits that the goods in question that is Molecular Sieve is not capital goods or even parts thereof. Therefore the contention of the adjudicating authority for excluding the item from the definition of input is not correct. He submits that the terms goods used in or in relation to the manufacture of final product means if the goods contained in the final product that will be as used in the manufacture of final products, in the present case, though the goods not contained in the final products but still used in the manufacture, it falls under the term in relation to the manufacture, of final products, therefore it is clearly input and credit cannot be denied. In support of his submission he placed reliance on the following judgments:
(i) Union Carbide India Ltd. Vs. Collector of C. Ex., Calcutta-I 1996 (86) E.L.T. 613 (Tribunal)
(ii) Alembic Chemical Works Co. Ltd. Vs. Commr. of C. Ex. & Cus. Baroda 1998 (100) E.L.T. 360 (Tribunal)
(iii) Residency Foods & Beverages Ltd. Vs. Commr. of C. Ex., Allahabad 1998 (101) E.L.T. 103 (Tribunal)
(iv) Cans & Closures Ltd. Vs. Collector of C. Ex.
1991 (56) E.L.T. 474 (Tribunal) Upheld by Supreme Court Collector Vs. Cans and Closures Ltd.
1995 (78) E.L.T. A 138 (S.C.)
(v) Collector of Central Ex., Calcutta-II Vs. Bajoria Rubber Industries 1996 (84) E.L.T. 45 (Tribunal)
(vi) Leader Engg. Works Vs. Commissioner of C.Ex., Chandigarh 1996 (88) E.L.T. 38 (Tribunal)
(vii) Joy Foam Pvt. Ltd. Vs. Collector of Central excise, Madras 1996 (83) E.L.T. 72 (Tribunal)
(viii) Commissioner of Central Excise, Indore Vs. Flex Chemicals Pvt. Ltd.
2002 (147) E.L.T. 508 (Tri.-Del.)
(ix) Reliance Industries Ltd. Vs. Commissioner of Central Excise, Surat-I 2004 (178) E.L.T. 529 (Tri.-Mumbai)
(x) Tamilnadu Petro-Products Ltd. Vs. Collector of C. Ex. Madras 2000 (120) E.L.T. 250 (Tribunal-LB)
(xi) Cyanamid India Limited Vs. Collector of Central Excise, Baroda 1997 (93) E.L.T. 576 (Tribunal) He particularly referred to the judgment of this Tribunal in the appellants own case according to which the goods in question used as catalyst in the manufacture of final products were allowed as input. In the present case also the goods i.e. Sodium Silico Aluminate which is a Molecular Sieve was used as catalyst during the course of manufacture of final product. Therefore the issue is no longer res integara, hence the credit is admissible. He further submits that the demand is also time bar as the longer period of limitation was invoked in demanding the modvat credit amount. He submits that the dispute was initially raised on the same product during the audit after obtaining views of Chemical Examiner/Dy. Chief Chemist who took the view that the Molecular Sieve was eligible for modvat credit accordingly the audit para was closed. Subsequently after 3 years the Assistant Commissioner raised the issue and show cause notice was issued invoking the larger period of limitation which is clearly not applicable in the facts of the present case. He also relied upon the following judgments:
(i) Nila Baurat Engineering Ltd.
Shri Yogesh Jhalla Vs. Commissioner of Central Excise, Nasik 2016-TIOL-2550-CESTAT-MUM
(ii) M/s. CJ Shah and Co. Vs. Commissioner of Central Excise, Rajkot 2014-TIOL-1412-CESTAT-AHM
4. On the other hand, Shri V.K. Agarwal Ld. Additional Commissioner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order.
5. We have carefully considered the submissions made by both the sides. To decide whether goods in question i.e. Sodium Silico Aluminate which is a Molecular Sieve is input or otherwise, it is necessary to understand the use and process of manufacture, in the course of which the same is used. Therefore the process of manufacture of final products i.e. LAB is as follows:
2.2 The process of manufacture of LAB, briefly stated, is as follows:
(a) Kerosene is pre-fractionated to obtain C10-C14 fractions of Kerosene (Pre-fractionation)
(b) The C10-C14 Kerosene is fed to hydrogen unit for removal of impurities with the help of hydrogen. (Hydrogen treatment)
(c) N-Paraffins are extracted from the purified C10-C14 Kerosene by the use of a chemical called "Sodium Silico Aluminiate (Molex Adsorbent ADS-14) which is also known as "Molecular Sieve". The said chemical (Molecular sieve) extracts the N-Paraffins from the Kerosene by the process of adsorption. (Molecular extraction).
(d) The N-Paraffin so extracted is then converted into Olefin in the Pacol unit.
(e) The Olefins are then treated with Benzene in the alkylation unit to obtain LAB.
From the above process it is observed that the process of manufacture of LAB start from the stage of Kerosene and in the process of extraction of N-Paraffins from the purified C10-C14 Kerosene by the use of a chemical called Sodium Silico Aluminiate which is a Molecular Sieve is used by the process of absorption, thereafter N-Paraffins so extracted is then converted into Olefin in the Pacol unit. The Olefins are then treated with Benzene in the alkylation unit to obtain LAB. It is clear that during the entire process of manufacture from Kerosene stage to obtaining the Linear Alkyl Benzene (LAB) Sodium Silico Aluminate is indeed used which opts as a major role in the process as catalyst. As contended by the adjudicating authority, by any stretch of imagination it cannot be said this Sodium Silico Aluminate is either any equipment/appliance/apparatus of the plant, machinery of the appellant. It is admittedly a chemical and used during the course of manufacture, therefore in our considered view it is an input. Though the various judgments cited by Ld. Counsel supports the case of the appellant but in particular, in their own case reported as Reliance Industries Ltd. Vs. CCE 2004 (178) E.L.T.529 on the identical goods i.e Molecular Sieve, the modvat credit was allowed. The relevant part of the order is reproduced below:
III. Molecular Sieves :?
III(a) The relevant portion of the Commissioner? (Appeals) order denying the Modvat credit on Molecular Sieves is as under :-
These are used at the POY plant.
The adjudicating authority has denied credit on ground that Molecular Sieves perform the function of purifying air by removal of moisture.
Hence this is in the nature of input and therefore credit under Rule 57Q meant for capital goods cannot be granted for this item. I agree with this.
It is seen the appellants took credit for this item under Rule 57Q in view of the show cause notices issued by the range authorities for credit taken earlier for similar goods under Rule 57A. The first adjudication order granting Modvat credit under 57Q for molecular sieves was issued by the JAC in July 1996 vide Order in original No. SRT-IV/Adj/82/96/MP dated 18-7-1996. Since the item has no role to play in the manufacture of goods in the light of Supreme Court judgment in Rajasthan Steel Chemicals Works, 1991 (55) E.L.T. 444 credit is not available to this item.
I also disagree with the appellants contention that if an article was not covered under Rule 57Q, it was fully covered under Rule 57A. III(b) Findings?
The Commissioner (Appeals) in fact agreed with the adjudicating authority that Molecular Sieves is in the nature of input. He has also accepted the factual position for the subsequent period and Modvat credit has been extended to Molecular Sieves under Rule 57Q. When the Commissioner (Appeals) is accepting the position that Molecular Sieves is in the nature of input, the credit ought to have been granted under Rule 57A. Declaration filed in terms of Rule 57Q is sufficient for the purposes of extending the credit, under Rule 57A for Molecular Sieves. This submission is fully supported by the decision of Larger Bench in CCE v. Modi Rubber - 2000 (119) E.L.T. 197 and the decision of CEGAT in the case of Devyani Beverages Limited v. CCE - 1999 (113) E.L.T. 503. Further, the Tribunal in the case of CCE v. Flex Chemicals - 2002 (147) E.L.T. 508 allowed Modvat credit on Molecular Sieve as input though assessee claimed Molecular Sieves to be capital goods. The Tribunal followed the decision of Larger Bench in the case of Modi Rubber cited supra. In view of the above, the credit taken on Molecular Sieves is allowable From the above decision of the Tribunal the issue is no longer res integara and the credit on Molecular Sieves is admissible. As regard the limitation, we find that the issue once raised by the audit and the para was closed after the opinion of chemical examiner thereafter almost after three years the show cause notice was issued. With this fact, it is clear that the availment of credit on Molecular Sieves was known to the department therefore the demand is hit by limitation also as there is no suppression of fact on the part of the appellant. As per our above discussion, the credit on Molecular Sieves is admissible, the demand is not sustainable on merit as well as on limitation. The impugned order is set aside. The appeal is allowed.
(Pronounced in court on 05/01/2017)
(Raju)
Member (Technical)
(Ramesh Nair)
Member (Judicial)
SM.
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Appeal No.E/1432/06