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2009 (8) TMI 964

..... ed from M/s. Shree Chh. Shahu SSK Ltd., Kagal, Dist. Kolhapur against the O-I-O No. 07/JTC/CEX/2008, dated 23-3-2009. The brief facts involved in the appeal are that the appellant, who is engaged in the manufacture of excisable goods falling under Chapters 17 and 22 of the CETA, 1985, availed the input service credit paid on man power recruitment or supply agency service used for handling, loading and unloading of press mud, compost and boiler ash which were attracting NIL rate of duty, during the period from August, 2007 to January, 2008; that as per the Rule 6(1) of the Cenvat Credit Rules, 2004 (hereinafter referred as the Rules), the Cenvat credit shall not be allowed on such quantity of input or input services which are used in the manufacture of exempted goods or exempted services and as per Explanation III of Rule 6(3) of the said rules, it was clarified that the credit shall not be allowed to input services used exclusively for manufacture of exempted goods or exempted services; that basing on the above facts, the appellant was issued with a SCN dated 26-8-2008 directing them to show cause as to why the cenvat credit of Rs. 17,69,572/- which includes education cess, wrongly .....

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..... ost fertilizer; (iv) that manpower recruitment or supply agency service was obtained for handling boiler ash/compost which are in turn used in or in relation to dutiable final product, since the boiler ash/compost are also non excisable and the appellant relies on the Apex Court decision in the case of UOI v. Ahmedabad Electricity Co. Ltd. - 2003 (158) E.L.T. 3 (S.C.); (v) that in various orders of the adjudicating authorities of Pune-II Commissionerate, the boiler ash is held as non excisable and the appellant relies on the following decisions - (a) Final Order No. A/1224- 1228/C-IV/SMB/2007 dated 20-8-2007 passed in the case of Kumbhi Kasari SSK Ltd., (b) Final order No. A/1969/WZB/05/C-V/SMB, dated 8-11-2005 passed in the case of M/s. Gadhinglaj Taluka SSK Ltd., (c) EID Parry (India) Ltd. v. CCE [2004 (176) E.L.T. 734 (Tribunal) = 2004 (61) RLT 673] and (d) Chengalrayan Co-op. Sugar Mills Ltd. [2007 (218) E.L.T. 416] (vi) that as the credit is not deniable, the penalty of Rs. 80,640/- imposed under Rule 15 of the Rules is also not sustainable; (vii) that the issue involved is of interpretation and the availment of credit is not proved with mala fide intention and above all as th .....

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..... hat the appellant further contends that as per Pollution Control Regulation, they cannot throw away the waste viz. boiler ash/spent wash which are otherwise harmful to the environment and accordingly, they are taken to the compost pit where due to natural phenomenon, compost fertilizer emerges and therefore, the use of input service i.e. man power recruitment or supply agency service was used for removing those wastes to keep the environment free from pollution which activity is also form part of the manufacturing activity for the production of their final products. 4.1 No doubt, the boiler ash/spent wash/compost are found mentioned in the Central Excise Tariff Act, 1985, which are attracting NIL rate of duty. But according to the appellant, based on the decision of the Apex Court in the case of UOI v. Ahmedabad Electricity Co. Ltd. supra, these two products cannot be considered as excisable commodities. The contention of the appellant is correct, in as much as the Apex Court in the said case has held that Mere listing of an item in Schedule to Central Excise Tariff Act, 1985 is not sufficient to make it excisable as they have to pass further test of being manufactured or produced .....

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..... th pollution. The manpower recruitment or supply agency service is used for removing wastes in question, in the instant case, is part and parcel of manufacturing activities for production of end products of the appellant. On this ground also, the appellant is entitled to avail input service credit paid on the said service. 4.3 Further, the appellant contends the other contention of the appellant that the wastes in question are not the final products for the appellant and the final products of the appellant are sugar and molasses which are dutiable. I agree with the contention of the appellant that these two wastes cannot be considered as final products. In other words, the appellant has not taken the registration for production of boiler ash and spent wash and they are holding registration for manufacture of sugar and molasses. The input service i.e. manpower recruitment or supply agency service was used in relation to manufacture of their final products. The Apex Court in the case of CCE v. Solaris Chemtech Ltd. -2007 (214) E.L.T. 481 (S.C.) has held that the inputs used as fuel for generation of electricity captively consumed will qualify for Modvat credit only if they are used i .....

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..... ed for input service credit paid on manpower recruitment or supply agency service and whereas the department wants to deny the same on the ground that the service was used in connection with handling, loading and unloading and collecting of press mud, compost and boiler ash which are exempted/non excisable. Under the above circumstances, it is not justifiable to impose penalty on the appellant. In fact, there are favourable decisions for the appellant. Further, the appellant contends that imposition of penalty under Rule 15, without mentioning sub-rule under which the appellant is liable to pay penalty is also not justifiable. The OIO has not invoked any sub-rules under which the appellant is liable for penalty. The Apex Court in the case of Amrit Foods v. CCE, U.P supra has held that Assessee to be put on notice as to exact nature of contravention for which assessee was liable under provisions of Rule 173Q/Rule 25 of Central Excise Rules, 2002 . As the above Apex Court decision is squarely covering the issue, the penalty imposed under Rule 15, without mentioning sub-rules, has to be set aside. Further as contended by the appellant the penalty is imposable on the manufacturer avail .....

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