Custom, Excise & Service Tax Tribunal
Cce, Jallandhar vs M/S. Pioneer Agro Industries Ltd on 18 March, 2010
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No. 2, R.K. Puram, NEW DELHI COURT NO. III CENTRAL EXCISE APPEAL NO. 23 OF 2008-SM [Arising out of Order-in-Appeal No. 315/CE/APPL/JAL/2007 dated 4.10.2007 passed by the Commissioner (Appeals), Customs & Central Excise, Jalandhar] Dated of hearing/decision; 18th March, 2010 For approval and signature: Honble Mr. Rakesh Kumar, Member (Technical) 1. Whether Press Reporters may be allowed to see the order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it would 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 of the order? 4. Whether order is to be circulated to the Departmental authorities? CCE, Jallandhar Appellant Vs. M/s. Pioneer Agro Industries Ltd., Respondents Appearance: Shri S.K. Bhaskar, Authorised Representative (SDR) for the Revenue; Miss Asmita Nayak, Advocate for the respondents Coram: Honble Mr. Rakesh Kumar, Member (Technical) ORAL ORDER NO._________________ dated __________
Per RAKESH KUMAR:
Facts giving rise to this appeal by the Revenue are, in brief, as under:-
1.1 One of the products being manufactured by the Respondents is Liquid Glucose which is manufactured from wheat and rice and common input used are Hydro Choloric Acid, Enzyme and Activated carbon in respect of which input duty credit has been taken. In the course of manufacture of Liquid Glucose, Gluten, and Spent Carbon emerge as unavoidable by-products both of which are fully exempted from duty. The point of dispute is as to whether in respect of clearances of Gluten and Spent Carbon an amount equal to their sale value was payable by the Respondents in terms of Rule 6(3)(b) of the Cenvat Credit Rules, 2002, as the Respondent have not maintained separate account and separate inventory of the inputs meant for use in the manufacture of dutiable finished products and the inputs meant for use in manufacture of exempted finished products. It is on this basis that a show cause notice dated 4.8.2005 was issued to the Respondent for demand of Rs. 4,19,791/- along with interest from the Respondent in respect of clearances of Gluten and Spent Carbon and imposition of penalty under Rule 13 of Cenvat Credit Rules. The show cause notice was adjudicated by the Asst. Commissioner vide Order-in-Original dated 18.4.2006 by which proceedings initiated against the Respondent were dropped. The Asst. Commissioner dropped the proceedings mainly on the basis that Gluten and Spent Carbon have emerged as unavoidable By-products and the Cenvated input Hydro Choloric Acid has not been used in the manufacture of Gluten but has been used in the manufacture of Liquid Glucose. The Department filed a review appeal before the Commissioner (Appeals) against the Asst. Commissioners order and the Commissioner (Appeals) vide Order-in-Appeal dated 4.10.2007 dismissed the departments appeal. It is against this order that the department has filed appeal before the Tribunal.
2. Heard both sides.
2.1 Shri S.K. Bhaskar, learned D.R., assailed the impugned order reiterating the grounds of appeal and pleaded that the Commissioner (Appeals)s order is not correct in view of the recent judgement of the Bombay High Court in the case of CCE, Thane vs. Nicholas Piramal (India) Ltd., reported in 2009 (244) ELT 321 (Bom.) wherein the Honble High Court has held that when common Cenvated inputs are used in the manufacture of dutiable as well as exempted finished products and as per condition of Rule 6(2) of Cenvat Credit Rules separate account and inventories of the Cenvated inputs used in the manufacture of dutiable finished products and exempted finished products are not maintained, the provision of Sub-rule (3) of Rule 6 would become applicable irrespective of hardship in maintaining of account and following the requirement of Rule 6(2).
2.2. Miss Asmita Nayak, Advocate, the learned Counsel for the Respondent pleaded that in this case product to be manufactured by the Respondent is Liquid Glucose, not Gluten or Spent Carbon, that Gluten and Spent Carbon emerge as unavoidable By-product; that cenvated inputs have been used in the manufacture of liquid glucose, not in the manufacture of unavoidable by-products spent carbon and gluten, that it is the judgement of the Tribunal in the case of Narmada Gelatines Ltd. vs. CCE, Bhopal, reported in 2009 (233) ELT 332 (Tri. Del.) and Rallis India Ltd. vs. UOI, reported in 2009 (233) ELT 301 (Bom.) which are applicable to the facts of this case, as when the exempted finished products emerge as unavoidable By-product, maintaining separate account and inventories of the inputs used in the manufacture of dutiable finished product and exempted By-product is impossible. In view of this, she pleaded that the impugned order is correct and does not merit any interference.
3. I have carefully considered the submissions from both sides and perused the record. The undisputed fact in this case are that finished product manufactured by the Respondents is Liquid Glucose for which starting material is wheat and rice, and enzyme, Hydro-choloric Acid and Activated carbon are used in processing the material. In the course of processing of wheat and rice to obtain liquid glucose, Gluten and spent carbon emerge as unavoidable byproducts and even if the respondent want they cannot maintain separate account and inventories of inputs used for the manufacture of liquid glucose and inputs meant for manufacture of Gluten and spent carbon as gluten and spent carbon are unavoidable by-products, not the products which the Respondent wanted to manufacture. In my view in this case, it is the judgment of Rallis India Ltd. (supra) and the Tribunals decision in the case of Narmada Gelatines Ltd. (supra) which are applicable to the facts of this case. In the case of Nicholas Piramal (India) Ltd. the respondents were manufacturing two finished products and Vitamin A falling under Chapter heading 29.36 and Animal Feed supplement falling under Chapter heading 23.02 of the Schedule to the Central Excise Tariff Act, 1985 and while Vitamin A is liable to central excise duty, animal feed supplement was not liable to central excise duty, but since common inputs in respect of which cenvat credit had been taken had been used in the manufacture Vitamin A falling under Chapter heading 29.36 and Animal feed supplement and separate account and inventories of the inputs used in the manufacture of dutiable and fully exempt product had not been maintained, the department invoked Rule 6(3)(b) and had demanded an amount equal to 8%/10% of the value of the exempted finished product. It is this background that the Honble High Court held that irrespective of hardship involved in maintaining separate account and inventories and irrespective of huge difference between actual quantum of credit on the inputs used in the manufacture of exempted finished product and the amount payable in terms of Rule 6(3)(b), in view of the clear provision of sub-rule (2) & (3) of Rule 6, the amount equal to 8%/10% of the value of exempted product would be payable by the respondents in terms of Rule 6(3)(b). In this case as discussed above, intended finished product is only liquid glucose and Gluten and Spent carbon emerge only as unavoidable by-products and, therefore, Honble Bombay High Courts judgment in the case of CCE, Thane vs. Nicolus Piramal (India) Ltd. (supra) is not applicable to this case. In view of this, I do not find any infirmity in the impugned order. The appeal is dismissed.
(RAKESH KUMAR) MEMBER (TECHNICAL) RK ??
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