Customs, Excise and Gold Tribunal - Mumbai
Collr. Of C. Ex. And Cus. vs Dhrangadhra Chemicals Works Ltd. on 8 November, 1990
Equivalent citations: 1991ECR318(TRI.-MUMBAI), 1991(53)ELT400(TRI-MUMBAI)
ORDER R. Jayaraman, Member (T)
1. This is an appeal filed by the Collector of Central Excise, Rajkot against the order of the Collector(Appeals) bearing No.GSM-2443/89 Rajkot dated 11-12-89.
2. Shri Mondal, the Ld. Deptt. Representative, stated the facts of the case as below:
The respondents are manufacturer of soda ash. They are availing of modvat credit in respect of inputs such as ammonia, sodium sulphate etc. used in the final product soda ash. They are also removing part of the soda ash, for brine water purification captively under Exemption Not. No.154/68 dated 3-8-1968. As per this Notification, soda ash removed for purification of brine water within the factory to be used in the production of excisable or non-excisable goods upto 3% of sodium chloride contents of the common salt in the process of purification of brine is exempted from payment of duty. In this case, they had availed of modvat benefit, even in respect of such soda ash removed captively for the purification of brine water cleared at Nil rate of duty as per the aforesaid notification. This was objected to by issue of two show cause notices; one dated 15-4-1988 for the period from 1-3-1986 to 29-2-88 and other dated 30-8-1988 for the period from 1-3-1988 to 31-7-1988. The Asstt. Collector has confirmed the demands holding that soda ash is the final product and soda ash removed for captive use for brine purification is exempted from duty and hence in terms of Rule 57C, modvat credit is not available. However, when the matter was taken up before the Collector (Appeals), the Collector (Appeals) has construed such soda ash removed captively for brine water purification as an intermediate goods and extended the benefit under Rule 57D(2) of the Central Excise Rules. After narrating the facts as above, Shri Mondal referred to Rule 57C and Rule 57D and argued that it is not disputed that soda ash is their final product. It is also not disputed that soda ash after manufacture and storage removed for captive consumption in purification of brine in terms of Exemption Notification. Hence, this case comes squarely within the purview of Rule 57C. Rule 57D refers to intermediate products, which have come into existence during the course of manufacture of final product by any stretch of imagination it cannot be contended that soda ash, which is the final product, comes into existence during the course of manufacture of final product. viz. soda ash. Hence, the Collector's order holding that soda ash is an intermediate product coming within the purview of Rule 57D is not correct, only provisions of Rule 57C are to be applied. Accordingly modvat credit is to be denied on merits. However, on the question of time bar, he fairly conceded that as per the decision of this Tribunal, demand under Rule 57(1) is subject to the limitation of time as prescribed under Section 11A.
3. Shri Sheth, the Ld. advocate on behalf of the respondents, contended that purification of brine water is an essential process in the manufacture of soda ash. For purification of brine, soda ash is one of the main ingredients. If they had paid duty on soda ash, they would have been entitled to modvat benefit in respect of the inputs and also duty paid on soda ash would be eligible for modvat benefit. Hence, there is no question of revenue loss. He, therefore, sought to defend the order contending that soda ash, merely because it was taken off the shelf for captive use, cannot deprive it of the status of an intermediate product. It is a product for further manufacture of soda ash, hence in this view it should be considered as an intermediate product. He also contended that part of the first demand dated 15-4-88 is time barred, though the second demand is within time.
4. After hearing both the sides, we find that the issue to be considered in this appeal is, whether in the facts and circumstances of the case, Rule 57C is to be applied or Rule 57D is to be applied. The undisputed facts are that soda ash is the final product, which after manufacture, is removed under exemption notification for brine purification. As seen from the exemption notification, soda ash issued for brine purification can be used in the production of excisable as also for non excisable goods. In the case of the respondents, no other excisable or non excisable goods, other than soda ash, is reported to be produced. It is also not the case of the Respondents that soda ash so used for brine purification is retrieved subsequently. It is an admitted position that fully manufactured soda ash is cleared under exemption for captive use. For construing this as an intermediate product as per Rule 57D that product should have come into existence during the course of manufacture of final product and such intermediate product is for the time being exempted. In this case, there is a considerable force in the argument of the learned SDR that soda ash removed for brine purification does not occur in the manufacture of final product viz. soda ash. Hence, applying provisions of Rule 57D to the present facts and circumstances is to be ruled out. The Collector has erred in applying Rule 57D. The Rule applicable, is only Rule 57C and hence on merits, such soda ash removed for brine purification is not eligible for modvat benefit, because it is exempted from whole of the duty payment. We would not like to go into the hypothetical question of absence of revenue loss argued by the learned advocate, since the admitted position is that soda ash is removed without payment of duty. In this view of the matter, we allow the appeal of the Department on merits. However, as regards the time bar, the Department can enforce the demands only to the extent of limitation of time prescribed under Section 11A of the CE Act.
5. Shri Sheth stated that the demands have been met fully. If that be so, consequential relief is to be given limiting the demands to the period of six months only.