TMI Blog2007 (1) TMI 455X X X X Extracts X X X X X X X X Extracts X X X X ..... de into the process of manufacture of refined edible oils as also from the scrutiny of records maintained by the appellants, it appeared to the department that the appellants were liable to pay, but had not paid, under Rule 6(3)(b) of CCR 2002, 8% of the price of the refined edible oils (unbranded) which had been cleared at Nil rate of duty during March to December 2003. This finding was based on the fact that Cenvat credit had been availed on packing materials and chemicals which had been used as common inputs during the said period in relation to the manufacture of both dutiable final products (branded refined edible oils) and exempted final products (unbranded refined edible oils). 8% of the price of the exempted final products was estimated at Rs. 3,78,10,848/-. The department also noticed certain other wrong Cenvat credit availments by the appellants. Accordingly, show-cause notice dated 7-4-2004 was issued to the appellants demanding the aforesaid and other amounts (with interest thereon) and proposing penalties. The noticee contested the demands. In adjudication of the dispute, learned Commissioner passed the following order :- (A) I demand Rs. 29,40,702/- (Rupees tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly) being the excess credit taken during July, 2003 and appropriate the said amount already paid by the assessee on 23-1-04 (S.No. 4 to Annexure D to SCN and Para 21(2)(viii) above) v. Rs. 68,461/- (Rupees Sixty eight thousand four hundred and sixty one only) being the excess credit taken during September, 2003 and appropriate the said amount already paid by the assessee on 23-1-04 (S.No. 5 to Annexure D to SCN and Para 21(2)(ix) above). vi. Rs. 29,545/- (Rupees Twenty nine thousand five hundred and forty five only) being the excess credit taken during September, 2003 and appropriate the said amount already paid by the assessee on 23-1-04 (S.No. 6 to Annexure D to SCN and Para 21(2)(x) above). vii. Rs. 2,28,562/- (Rupees Two lakhs twenty eight thousand five hundred and sixty two only) being the excess credit taken and appropriate the said amount already paid by the assessee on 23-1-04 (S.No. 7 to Annexure D to SCN and Para 21(2)(xi) above). viii. Rs. 29,272/- (Rupees Twenty nine thousand two hundred and seventy two only) being the excess Transitional credit taken during March 2003 on the films lying in stock and appropriate the said amount already pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 11AB of the Central Excise Act, 1944. (J) I impose penalty of Rs. 5000/- (Rupees Five thousand only) under Rule 27 of the Central Excise Rules, 2002 for the offences/contraventions as described under Para 22, 23 and Para 28E and 28F above. (K) I impose a penalty of Rs. 1,00,000/- (Rupees One lakh only) under Sub rule (1) of Rule 13 of the Credit Rules 2002 for the offences/contravention as detailed in Para 19, 21, 28A and 28D(i) to 28D(xi) above. (L) I impose a penalty of Rs. 10,00,000/- (Rupees Ten Lakhs only) under Rule 13 of the Credit Rules, 2002 for the offences/contravention described in Para 20, 21(2), 28B and 28C above. 2. In the present appeal, the appellants are contesting only the demand of duty of Rs. 29,40,702/-, demand of the amount of Rs. 3,78,10,848/- and the penalties. 3. Heard both sides and considered their submissions. 4. Issue No. 1 :- Whether the appellants were entitled to take Cenvat credit on 1-3-2003 and thereafter in respect of the capital goods which were received and installed in their factory during April 2002 to February 2003 and used for the manufacture of final products which were exempt from payment of duty of excise du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exclusively for the manufacture of exempted final products and, on account of the bar created under Rule 6(4) of the CCR 2002, the appellants were not entitled to take credit of the duty paid on the capital goods. A right which was not available to the party on the relevant dates was inadmissible to them for ever and hence the appellants were not entitled to take credit of any part of the duty paid on the capital goods, as Cenvat credit later in the financial year on the ground that their final products became dutiable in that part of the financial year. In this connection, reliance was placed on the Tribunal s decision in Commissioner v. Surya Roshni, 2003 (155) E.L.T. 481 (Tri-Del), wherein eligibility for capital goods credit under Rule 57Q of the Central Excise Rules, 1944 was held to be determinable with reference to the date on which the capital goods were received in the factory and it was held that, if on that date, the final products were dutiable, such credit would not be admissible to the manufacturer and that any subsequent event of the final product becoming dutiable would not render the capital goods eligible for credit. Ld. SDR, further, pointed out that the civil ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion had been received and installed in the factory during April 2002-February 2003 when the final products were not dutiable. The question now to be considered is whether, on account of the final products being dutiable in March 2003, the appellants were entitled to take Cenvat credit to the extent of 50% of the duty paid on the capital goods in terms of Rule 4(2)(a) of the Central Excise Rules, 2002. This provision of law reads as under :- (2) (a) The CENVAT credit in respect of capital goods received in a factory at any point of time in a given financial year shall be taken only for an amount not exceeding fifty per cent of the duty paid on such capital goods in the same financial year : Provided that the CENVAT credit in respect of capital goods shall be allowed for the whole amount of the duty paid on such capital goods in the same financial year if the said capital goods are cleared as such in the same financial year. According to learned counsel, the date of receipt of capital goods in factory is immaterial for the above provision and, therefore, credit of upto 50% of the duty paid on capital goods received at any point of time in a given financial year would be av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the said period. The fact that, during that period, their by-products were dutiable but eligible for value-based exemption from payment of duty under SSI Notification did not detract from this stance. The appellants, admittedly, started taking capital goods credit only from 1-3-2003, the date on which refined edible oils became dutiable under the 2003 Budget of the Central Government. The question to be considered is whether the right to take capital goods credit accrued to them on the dates of receipt of the capital goods in their factory or on the date on which their final products became dutiable. A similar question was considered by the Tribunal in the case of Surya Roshni (supra) and it was held as under :- The availability of Modvat credit is to be looked into at the time of receipt of the capital goods. If the capital goods are exclusively used in the manufacture of exempted products, Modvat credit will not be available to the manufacturer. Subsequently, the exempted product became dutiable on account of withdrawal of exemption or the manufacturer puts the capital goods to other use would not revive the question of Modvat credit which stands determined at the time the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit on capital goods used exclusively in the manufacture of exempted final products. The nature of the benefit has to be gathered from the text of the provision of law which confers it on the beneficiary. Capital goods credit was allowed to the appellants by Rule 3(1) of the CCR, 2002, which allowed the manufacturer or producer of final products to take credit of specified duties of excise paid on any inputs or capital goods received in the factory on or after the first day of March 2002. This provision itself appears to have recognized the date of receipt of inputs/capital goods in factory as the relevant date for a manufacturer of final products to exercise his right of taking Cenvat credit. Hence it is not correct to say that the CCR, 2002 treat inputs and capital goods differently with regard to the date on which credit of duty paid thereon could be taken by the manufacturer of final products. In respect of inputs, Rule 6(1) is in the nature of a proviso to Rule 3 inasmuch as Rule 6(1) prohibits availment of Cenvat credit on such quantity of inputs which is used in the manufacture of final products exempt from payment of duty. Similarly, Rule 6 (4) is in the nature of a pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of the Revenue. Accordingly, it is held that the appellants were not entitled to take Cenvat credit, after 28-2-2003, of the duty paid on the capital goods received in their factory between 1-4-2002 and 28-2-2003. The demand of duty of Rs. 29,40,702/- stands confirmed against the appellants. 5. Issue No. 2 : Whether the appellants are liable to pay 8% of the value of the exempted final products cleared from their factory during March to December 2003, under Rule 6(3)(b) of the CCR 2002. 5.1 The submissions made by both sides on this issue call for a mention of the relevant aspects of the appellants manufacturing activity. During the material period, they were engaged in the process of refining crude vegetable oils, which was a continuous process as shown in the following flow chart : Crude Veg. Oil " Neutralisation-Degumming " Removal of fat $ Filtration ! De-waxing ! Bleaching $ De-odourisation " Filtration " Refined Veg. Oil The appellants also used to procure processed (refined) edible vegetable oil on payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xempted final product sold by them from their factory during such period. 5.3 Ld. Sr. Advocate submitted that the appellants had, in fact, maintained separate accounts in respect of inputs used in the manufacture of dutiable final products and those used in the manufacture of exempted final products during the above period in terms of Rule 6(2). They had not opted not to maintain such accounts and, therefore, Rule 6(3) was not applicable to them. As per the separate accounts maintained by them, the appellants had taken credit only on that quantity of inputs which was used in the manufacture of the edible oils cleared on payment of duty and had not taken similar credit on the inputs used in the manufacture of the exempted category of final products. A small amount of credit wrongly taken on such inputs (used in the manufacture of exempted final products) was reversed later but before issue of the SCN. Ld. counsel argued that, with such reversal of credit, the position would be that the appellants had not at all taken input-duty credit in relation to the exempted final products. Therefore, according to him, the appellants were not liable to make any payment under Rule 6(3)(b) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for refined edible oils, if manufactured out of refined edible oil on which appropriate duty of excise under the CETA Schedule (where the input oil was procured indigenously) or Additional Customs Duty under the CTA Schedule (where the input oil was imported) had already been paid. Admittedly, the appellants enjoyed the benefit of this Nil rate of duty for the refined edible oil obtained by de-odourisation and filtration of the duty-paid refined oil procured from other refineries. By doing so, they were virtually conceding that refined edible oils could be manufactured out of refined edible oils in terms of Note 4 to Chapter 15 of the CETA Schedule. Ld. counsel had no answer to this argument of Id. SDR. We have found substance in the SDR s submissions and, therefore, reject the counsel s plea that no manufacture was involved in the processes undertaken by the appellants on the duty-paid refined vegetable oils procured by them from other refineries. The Tribunal s decision in Bun Cones Pvt. Ltd. (supra) or the apex court s decision in Shyam Oil Cake Ltd. (supra) is of no aid to the appellants in the facts of the present case. It is particularly noteworthy that, in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rule (3)(b), to pay an amount equal to 8% of the price of the exempted final product sold by them during such period. The relevant provisions of Rule 6 are reproduced below :- Rule 6. Obligation of manufacturer of dutiable and exempted goods. - (1) The CENVAT credit shall not be allowed on such quantity of inputs which is used in the manufacture of exempted goods, except in the circumstances mentioned in sub-rule (2). Provided..........rule. (2) Where a manufacturer avails of CENVAT credit in respect of any inputs, except inputs intended to be used as fuel, and manufactures such final products which are chargeable to duty as well as exempted goods, then, the manufacturer shall maintain separate accounts for receipt, consumption and inventory of inputs meant for use in the manufacture of dutiable final products and the quantity of inputs meant for use in the manufacture of exempted goods and take CENVAT credit only on that quantity of inputs which is intended for use in the manufacture of dutiable goods. (3) The manufacturer, opting not to maintain separate accounts shall follow either of the following conditions, as applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... film procured by the appellants from various suppliers and used in the manufacture of exempted final products during the above period. All the above particulars except Cenvat credit are found in this account also. The appellants have also produced a tabular statement titled FILM CONSUMPTION FOR EXEMPTED STOCK (MONTHWISE) AS PER CENTRAL EXCISE SCN . This statement contains particulars of monthwise consumption of plastic film for the period May to December 2003. It also incorporates particulars of bills covering input on which Cenvat credit was not taken. It appears from the two ledger accounts produced by the appellants that they were maintaining separate accounts in respect of input used in the manufacture of dutiable final products and input used in the manufacture of exempted final products. Of course, they maintained such accounts in their own formats in the absence of any format prescribed by the department. In any case, it can hardly be said that the appellants had not opted to maintain separate accounts required under sub-rule (2) of Rule 6 and, therefore, the demand raised on them under sub-rule (3) will not be sustainable. 5.7 According to the adjudicating authority, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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