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2015 (11) TMI 1413 - SUPREME COURT

2015 (11) TMI 1413 - SUPREME COURT - 2015 (326) E.L.T. 13 (SC) - Manufacture - dutiability of the intermediary product 'Clinker' - captive consumption - whether the product "Clinker" is covered by the Exemption Notification No. 67/1995 - Held that:- Clinker is used as input for production of Cement and Cement is exempted from the excise duty. Therefore, by virtue of this proviso insofar as Clinker is concerned, Exemption Notification would not apply. However, the matter does not end here inasmuc .....

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pted goods ('Cement') is cleared by the appellant who is a manufacturer of (a) 'dutiable final products' ('Clinker') and (b) 'exempted final products' ('Cement') after discharging the "obligation" prescribed in Rule 6 of the CENVAT Credit Rules, 2001, clause (vi) of the notification applies.

Applicability of Rule 6 of Cenvat Credit Rules - Held that:- As per the CESTAT, Rule 6 applies only if some final product is partly exempt and partly dutiable. However, we do not find any such res .....

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n the other hand, relevance of this Rule is only to the extent of 'obligation' contained in the said Rule which is to be discharged. A plain reading of clause (vi) of the notification would show that it only contemplates a situation where 'a manufacturer manufactures both dutiable as well as exempt final products'. There may be different final products manufactured by the same manufacturer. The final products may be made out of the same product or out of different products. Clause (vi) does not .....

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10934 OF 2014, CIVIL APPEAL NO. 10394 OF 2013 - Dated:- 21-8-2015 - MR. A.K. SIKRI AND MR. ROHINTON FALI NARIMAN, JJ. For the Appellant : Mr. Ajay Aggarwal, Adv., Ms. Mallika Joshi, Adv., Mr. Rajan Narain, Adv., Mr. S. Ganesh, Sr. Adv., Mr. U. A. Rana, Adv., Ms. Mrinal A. Majumdar, Adv., M/s Gagrat & Co., Mr. V. Lakshmikumaran, Adv., Mr. M. P. Devanath, Adv., Mr. Vivek Sharma, Adv., Ms. L. Charanaya, Adv., Mr. R. Ramchandran, Adv., Mr. Aditya Bhattacharya, Adv., Mr. Hemant Bajaj, Adv., Mr. A .....

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contends that as per Rule 4 and 8 of the Central Excise Rules, no duty is payable in respect of the intermediate product 'Clinker' which is utilised within the factory in the manufacture of 'Cement'. Such 'Clinker' is not dutiable. In the alternative, it is submitted by the appellant that even if 'Clinker' is held to be dutiable, it is exempted under Exemption Notification No. 67/95-CE dated 16.03.1995. For the sake of convenience, we take note of the facts from C .....

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e. As mentioned above, cement is also produced by the appellant. Clinker and Cement are dutiable products under Chapter 25 of the First Schedule to the Central Excise Tariff Act, 1985, which deals with Salt; Sulphur; Clay and Stone; Plastering Materials; Lime and Cement. Sub-heading 25.02 in this behalf, which covers these products reads as under: - "25.02 Cement clinkers; cement, all sorts 2502.10 - Cement clinkers -Portland Cement (including ordinary Portland cement, Portland Pozzolana ce .....

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'Industrial Growth Centre' in Himachal Pradesh. Thus, on this final product, viz., cement, no duty is payable as it is exempted from payment of duty. To this extent, there is no dispute. In this manner, the appellant is a manufacturer, who manufactures in the aforesaid factory a 'dutiable final product' (Clinker) as well as 'exempted final product' (Cement), as contemplated in Clause (vi) of the Notification. On these facts, we have to examine as to whether the product & .....

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er referred to as the said Special Importance Act), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts - (i) capital goods as defined in the CENVAT Credit Rules, 2002 manufactured in a factory and used within the factory of production; (ii) goods specified in column(1) of the Table hereto annexed (hereinafter referred to as 'inputs') manufactured in a factory and used within the factory of production in or in relation to the manuf .....

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duty of excise or additional duty of excise leviable thereon, or are chargeable to nil rate of duty, other than those goods which are cleared, - (i) to a unit in a Free Trade Zone, or (ii) to a hundred per cent Export Oriented Undertaking, or (iii) to a unit in an Electronic Hardware Technology Part, or (iv) to a unit in a Software Technology Part, or (v) under notification No. 108/95-Central Excise, dated the 28th August 1995, or (vi) by a manufacturer of dutiable and exempted final products, a .....

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ton or man-made fibres falling under Chapter 52, Chapter 54 or Chapter 55 of the First Schedule to the said Act; (iii) fabrics of cotton or man-made fibres falling under heading No. 58.01, 58.02, 58.06 (other than goods falling under sub-heading No. 5806.20), 60.01 or 60.02 (other than goods falling under sub-heading No. 6002.10) of the First Schedule to the said Act. As per clause (ii), with which we are concerned, goods specified under column (1) of the table which are inputs and manufactured .....

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d be covered by column (1) of the Table as column (1) of the Table mentions of goods falling under the First Schedule to the Central Excise Tariff Act, 1985, with the exception of certain goods (inputs) specifically excluded and clinker is not one of those inputs. However, proviso appended to this Notification excludes those inputs where these are used in or in relation to the manufacture of the final product and that final product is also exempt. In the present case, we find that the Clinker is .....

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er of dutiable and exempted final products after discharging the obligation prescribed in Rule 6 of the CENVAT Credit Rules, 2001, then proviso would not apply. Therefore, the outcome of this case depends upon the answer to the question as to whether in the instant case, the appellants are discharging the obligation prescribed in Rule 6 of the CENVAT Credit Rules. On facts, there is no dispute that appellants have discharged the 'obligation' prescribed in Rule 6 of the CENVAT Credit Rule .....

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in respect of 'Clinker' which is captively consumed in the manufacture of 'Cement' as per the opening part of the Notification. The Customs, Excise and Service Tax Appellate Tribunal (for short 'CESTAT') has disallowed the exemption in respect of 'Clinker' as claimed above. As per the CESTAT, Rule 6 applies only if some final product is partly exempt and partly dutiable. However, we do not find any such restriction in Rule 6 which contemplates the situation where .....

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