Custom, Excise & Service Tax Tribunal
M/S. The Dharamsi Morarji Chemical Co. ... vs Commissioner Of Central Excise, Raigad on 31 March, 2010
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI APPEAL NO. E/1163/08 (Arising out of Order-in-Appeal No. SRK/532/RGD/2008 dated 1/9/08 passed by the Commissioner (Appeals) Central Excise, Mumbai Zone-II) For approval and signature: Honble Shri Ashok Jindal, Member (Judicial) ============================================================
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 :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Yes
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
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M/s. The Dharamsi Morarji Chemical Co. Ltd.
:
Appellants
VS
Commissioner of Central Excise, Raigad
Respondents
Appearance
Shri Vinay Sejpal Advocate,
Shri Sunil Agnihotri Consultant for Appellants
Shri H.B. Negi, SDR Authorized Representative
CORAM:
Shri Ashok Jindal, Member (Judicial)
Date of decision : 31/3/2010
ORDER NO.
Per : Ashok Jindal, Member (Judicial)
The appellant has filed this appeal against the impugned order confirmed the demand of Rs. 5,21,916/- and equivalent amount of penalty under Rule 15 of the Cenvat Credit Rules 2004.
2. The brief facts of the case are that the appellants are the manufacturer of Sulphuric Acid the said product is excisable and chargeable to duty at the rate of 16% BED. The said products are regularly supplied for various industrial uses and are cleared on payment of duty under cover of invoice as per Rule 8 read with Rule 11 and the monthly returns are also filed as per rule 12 of the Central Excise Rules, 2002.
3. The said sulphuric acid are also used for manufacturing of fertilizers and as a measure of relief to the fertilizer manufacturers, they are allowed to procure the said goods i.e. sulphuric acid under bond without payment of duty by issuing appropriate CT-3 certificate to the sulphuric acid manufacturers under the provisions of Notification No. 4/2006 dated 1.3.2006. Accordingly, the appellants have supplied the said goods under CT-3 certificate. The appellants are availing benefit of Cenvat credit on the inputs used in or in relation to the manufacture of said goods i.e. sulphuric acid and prior to 20.7.2006 they were reversing an amount of 10% of value as per rule 6 of Cenvat Credit Rules, 2004. They realized from the industry sources that the provisions of Rule 6 i.e. reversion of 10% was not required as the sulphuric acid was supplied under CT3 certificate and cannot be considered at par with exempted goods. Accordingly, they discontinued reversing/paying 10% under rule 6 for supplies to fertilizers manufacturers. The appellant were issued show cause notice proposing to recover 10% of the value of sulphuric acid supplied to fertilizer manufacturers against CT-3 certificates and the demand was dropped by the lower appellate authority. But on appeal by the Revenue, the same was confirmed with equivalent amount of penalty following the decision of the Supreme court in the case of Ballarpur Industries Ltd. reported in 2007 (215) ELT 489 (SC). Aggrieved from the same the appellant is before me.
4. Shri V.S. Sejpal, Advocate, the learned counsel for the appellant submits that provisions of Rule 6 of the Cenvat Credit Rules,2004 is not applicable to the facts of their case as they are not manufacturing two separate products namely dutiable goods and exempted goods to attract the provisions of Rule 6(2) of CCR, 2004. He further submits that their supplied made to fertilizer manufacturers under bond/against CT-3 Certificate cannot be considered as exempted goods. To support his contention he placed reliance on various decisions as under:
1] CCE, Nagpur Vs. Ballarpur Industries Ltd.
2007 (215) ELT 489 (SC) 2] CCE, Mumbai Vs. DCW Ltd.
2009 (234) ELT 163 (Tri.-Chennai) 3] CCE, Vapi Vs. Advance Surfactants India ltd.
2008 (88) RLT 275 (CESTAT-Ahmd) 4] Kesoram Rayon Vs. CCE, Kolkata-IV 2007 (83) RLT 397 (CESTAT-Kol) 5] CCE, Jaipur Vs. Guljag Industries Limited 2008 (86) RLT 133 (CESTAT-Del.) 6] Aureola Chemicals Ltd. Vs. CCE, Indore 2004 (175) ELT 148 (Tri. Del.)
5. On the other hand the learned DR submitted that the appellants were reversing 10% under Rule 6 prior to 20.7.06 and now they have stop making reversing the 10% and the provisions of rule 6 are applicable to this case as the appellant has cleared the goods as duty paid as well as the exempted goods to the fertilizer manufacturer who ultimately not paying any duty on the sulphuric acid and the fertilizers is also exempted goods. Hence the impugned order is sustainable.
6. Heard both the sides.
7. I find that the main contention of the appellant is that provisions of Rule 6 are not applicable to their case as the product namely sulphuric acid is not a exempted product. The reliance placed by the appellant in the case of CCE Vapi Vs. Advance Surfactants India Ltd. reported in 2008(88) RLT 275 (CESTAT-Ahmd.) has clearly held that Sulphuric Acid cleared without payment of duty under Notification no.4/2006-CE dt. 1.3.2006 is not under exempted goods and is not chargeable to nil rate of duty, 10% of the amount is not payable under Rule 6. In the case of Kesoram Rayon Vs. CCE, Kolkata-IV reported in 2007 (83) RLT 397 (CESTAT-Kol.) wherein the appellants took credit of input for manufacture of Sulphuric Acid, part of which was supplied under Chapter X procedure without payment of duty and the appellant did not maintain separate account and hence the department has demanded 8% of the value of sulphuric Acid is not sustainable and credit on inputs is not tenable in respect of the sulphuric acid supplied duty free under Chapter X Procedure. In the case of CCE, Jaipur Vs. Guljag Industries Limited reported in 2008 (86) RLT 133 (CESTAT-Del.) again it was held that goods removed wherein it was held that the Rule 57CC of the said erstwhile Rules is not applicable in respect of clearance under Chapter X procedure, which is neither exempted goods nor chargeable to Nil rate of duty. Further I find that the impugned order has been passed by the lower appellate authority following the decision of the Ballarpur Industries Ltd. (supra). I find that in the case of Ballarpur Industries Ltd. ratio has been laid down in para 8 which is reproduced here as under :
Value is the function of price. In every case in which there is an allegation of evasion, a show cause notice constitutes the foundation on which the demand made by the Department could stand or fall Rule 57CC deals with adjustment of credit on inputs used in the manufacture of exempted final products. It applies in cases where a manufacturer is engaged in the manufacture of any final product which is chargeable to duty as well as any other final product which is exempted form payment of duty or chargeable to nil rate of duty and the manufacturer takes credit of the specified duty on any inputs, which is used in manufacture of both the above categories of final products.
The apex court has held in that case the reversal of Cenvat credit of 10% under Rule 6 is applicable only and the cases where a manufacturer is engaged in the manufacture of any final product which is chargeable to duty as well as any other final product which is exempted from payment of duty or chargeable to nil rate of duty but in the instant case is not so as the final product is the sulphuric acid only and the same is dutiable product it is not a exempted product and the same was cleared to the manufacture of fertilizers under CT-3 Certificate/bond hence the facts of the Ballarpur Industries case are not applicable to this case, But the ratio laid down by the apex court in that case is squarely applicable to this case also. Further, I find that the ratio of the case of Aureola Chemicals ltd. Vs. CCE, Indore reported in 2004 (175) ELT 148 (Tri. Del.) is squarely applicable to this case wherein it was held that the appellants were clearing the Spent Sulphuric Acid under Chapter X Procedure to various manufacturers of fertilizers against CT-2 Certificates. The obligation is on the receiver of such goods to use the same in a specified industrial process. In case, the goods received under this procedure were not used for specified industrial process, the person who receive the goods is liable to pay the duty hence the goods cleared under Chapter X Procedure are neither exempted nor said to be chargeable to Nil duty, thus duty is not payable under Rule 57CC. In this case also, the goods cleared by the appellants against CT-3 bond to the fertilizers manufacturers cannot be term that the sulphuric acid is exempted product or chargeable to nil rate of duty. Hence the provisions of Rule 6 of CCR, 2004 are not applicable to this case. Accordingly, the appellant is not required to reverse 10% of the value of the goods cleared. The impugned order is set aside and the appeal is allowed with consequential relief if any.
(Pronounced in court) (Ashok Jindal) Member (Judicial) Sm 5