TMI Blog2017 (2) TMI 1279X X X X Extracts X X X X X X X X Extracts X X X X ..... whatsoever, the manufacturer of the final products shall pay an amount equal to the credit availed in respect of such input - Admittedly in the facts and circumstances, there is no case made out by Revenue that the appellant have not manufactured finished products from such inputs which were stored outside. Further, it is an admitted fact that the inputs stored outside were subsequently received back in the factory for which proper records are maintained as recorded in the Panchnama. Appeal allowed - decided in favor of appellant. - E/1823/2009-EX[SM] - A/71304/2017-SM[BR] - Dated:- 16-2-2017 - Mr. Anil Choudhary, Member (Judicial) Shri Bipin Garg (Advocate) - for Appellant Shri P.K. Singh, Supdt. (AR) - for Respondent ORDER Per: Anil Choudhary The issue in this appeal by the appellant a manufacturer of sugar and molasses and also Acetaldehyde, Acetic Acid, Acetic Anhydride, Ethyl Acetate, Rectified Spirit (Ethyl Alcohol), some of the final products are dutiable and some are not dutiable. There are two major demand involved in the matter, first one relates to reversal of credit of duty taken on molasses, used in manufacture of Rectified Spirit and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per production eport for the day upto 1400 hrs 1600 kg had been produced. Taking this fact into account the difference comes to shortage of 435 kg. (-) 435 kg 15225 2436 + 49 5 SDS (-) 3343.460 ltr Out of this Qty. of 1200 Ltr was consumed in manufacture of 1600 g of Ethyl Acetate (-) 2143.460 ltr 40190 6430 + 129 6 Oxalic Acid (-) 450 kg No justification given by the party (-) 450 kg 10350 1650 + 33 7 R.S.* (-) 119 kg As per party seems to be due to temp. diff. no evidence provided by the party (-) 119 kg - 457 + 9 8 Absolute Alcohol* (-) 279kg No justification given by the party (-) 279kg - 1077 + 21 9 Absolute Alcohol (Denatured)* (-) 156 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edit so availed being utilized by the appellant towards payment of duty on the clearance of finished goods or towards payment under Rule 6(3)(a)(i) of CCR, 2004. It further appeared that appellant while preparing the summary for the month of March 2005 of the RG 23 Pt. I register purposely bifurcated the said quantity of molasses in two parts, that is molasses used for Potable Alcohol and molasses used for Captive Alcohol. It appeared that molasses used for Potable Alcohol means molasses being used in the manufacture of Rectified Spirit which can either be used captively in the plant or for manufacture of dutiable goods or for sale to various customers. On the other hand, molasses used for Captive Alcohol means that the molasses exclusively used for captive consumption in the plant for manufacture of all dutiable goods. Further, on scrutiny of RG 23A Part I register, revealed that appellant had under the heading (Molasses used for Potable Alcohol) had not shown any fresh receipt of molasses. However, all fresh receipts of molasses have been shown against Molasses used for Captive Alcohol . It further appeared that appellant have bifurcated the inventories of molasses in said two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for the manufactured of rectified spirit, which have been sold or cleared by them at nil rate of duty, it appeared that they were doing the same. In order to avoid payment under Rule 6(3)(a)(i) of CCR, 2004. it also appeared that: - (i) Appellant were not manufacturing rectified spirit kept separately for clearing at nil rate of duty, (ii) Appellant were not storing rectified spirit cleared at nil rate of duty separately. (iii) Appellant could not store molasses of above two categories separately. 7. It further appeared that the main purpose of the appellant by bifurcating the RG 23 A Part-1 Register 1, in parts for molasses received from DSM, Kashipur or and the other part for molasses received from the other factories listed above, was to show separate storage of exempted molasses in order to claim that the exempted rectified spirit, which had been cleared from the factory had been manufactured out of the above mentioned exempted molasses. It appeared that they have done so in order to avoid any payment on the sale of rectified spirit at nil rate of duty under Rule 6(3)(a)(i) of CCR, 2004. It also appeared that another purpose for the same was to pay less amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of molasses was worked out as follows:- (a) Receipt of Molasses and rate of duty applicable S.No. Rate of applicable Qty. in Qtls. Month/date 1. @ 500 PMT i.e. ₹ 50/- per quintal 298503.87 (C.B. on 28.02.2005) 2. @ 1000 PMT i.e. ₹ 50/- per quintal 165913 75232.90 11188.30 (March-05) (April-05) (upto 07.05.05) 252334.20 TOTAL (b) Consumption of Molasses so procured. (i) Related to Molasses procured @ ₹ 500/- PMT i.e. 298503.87 qtls. S.No. Month/date Consumption Closing Balance 1. Upto 28.02.05 4447.40 (Transferred/Diverted to M/s DSSL)* 294056.47 2. March-05 21517.10 (Transferred/Diverted to M/s DSSL)* 272539.37 136638 (Consumption) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RG-1 registers for the period 2005-06 as per Annexure-B to the Panchnama and recovery percentage have been taken on the basis of Form No. 28 from the file of loose papers at Sr. No. 31 Annexure-B to the Panchnama. 10. Accordingly, it appeared that appellant was required to reverse Cenvat Credit ₹ 36,76,508/- + Cess ₹ 73,530/-while they have reversed only ₹ 11,77,537/- + Cess ₹ 23,550/-. It therefore appeared that there is a short reversal of an amount of ₹ 24,98,971/- + Cess ₹ 49,980/- totaling ₹ 25,48,951/-. As the appellant have deposited ₹ 20,27,790/- in the course of investigation, there was still required to reverse or pay an amount of ₹ 5,21,161/- under Rule 6(3)(a)(i) of CCR, 2004. 11. On scrutiny of document resumed from appellant revealed that between the period 24 January, 2005 to 10 March, 2005, they had diverted 25,964.50 Qtls. of raw material - molasses to another manufacturing unit M/s Dhampur Specialty Sugar Ltd (DSSL), which itself has been engaged in the manufacture of sugar related products by using sugar and molasses and other raw materials. It was also noticed that appellant had also availed Cenvat Cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 11 A of the Act as the appellant had not paid the said amount under Rule 6(3)(a)(i) of CCR, 2004 with further proposal to appropriate the amount already paid ₹ 20,27,790/- with further proposal to impose penalty, further the amount of ₹ 20,29,755/- involved on the molasses transferred to M/s DSSL was proposed to be recovered under Rule 4 of CCR, 2004 read with Section 11 A of the Act with further proposal to impose penalty. 13. The SCN was adjudicated vide Order-in-Original dated 14 February, 2008, whereby order of confiscation was passed as regards the excess quantity of Acetic Acid, Acetic Anhydride and Acetaldehyde under Rule 25 of CER with option to redeem on payment of fine ₹ 20,000/- in lieu of confiscation. Further, penalty ₹ 15,512/- was imposed under Rule 25 of CER, 2002. The proposed demand of ₹ 13,087/- involved on the goods found short was confirmed and the amount already paid ₹ 12,323/- was appropriated and the balance demand remaining ₹ 764/-. Further proposed differential demand of ₹ 25,48,951/- involved on the molasses used in the manufacture of rectified spirit cleared at nil rate of duty under Rule 14 of CC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against demand ₹ 13,087/-. With regard to the issue of reversal of Cenvat Credit taken on exempted goods, rectified spirit, as proposed under Rule 6(3)(a)(i) amounting to ₹ 25,48,951/-. The learned Commissioner observed that the appellant have maintained two types of molasses stock register, one for molasses received from M/s DSM, Kashipur without payment of duty and the other for molasses received from other sugar units on payment of duty, but they had not maintained separate inventory of inputs used for dutiable goods and inputs used for exempted goods as required under Rule 6(3) of CCR, 2004. The appellant is thus, in the view of the Department have to reverse credit of ₹ 20,27,790/-. The appellant was required to pay or reverse the appropriate amount under the provision of Rule 6(3)(a) of CCR on the quantity of molasses used for manufacturing of rectified spirit. As regards the quantity of molasses stored outside the factory and/or allegedly diverted to M/s DSSL. The learned counsel held that the appellant had diverted the inputs to other units on which Cenvat Credit had been taken. Accordingly, holding that the appellant had not followed Rule 3(5) of CCR read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant Commissioner as required under Rule 8 of CCR had not been applied before storing the same outside the factory premises, in the facility of their sister unit. However, he submits that there is no allegation or finding of diversion of the molasses. He further submits that molasses is a commodity physically controlled by the State Excise officers. Not a single drop of molasses can be removed without obtaining the permission and requisite permit of the State Excise Authorities, and in this connection, he drew my attention to the accounts maintained by them, where the State Excise Inspectors signature is required every time when molasses is cleared. He also submitted that permission have been given by the Central Excise Department post facto. It is his submission that as per Rule 8, for confirming the duty demand, it is required to show that inputs received have not been used in the manner specified in the Rules and mere fact that the same has been stored outside the factory without permission of the Department, is not sufficient. The learned counsel also demonstrated the proper account of molasses kept from the register maintained under the State Excise Act and Rules, being Registe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner and Assistant Commissioner having jurisdiction over the factory of the manufacture of the final products may, in exceptional circumstances, having regard to the nature of the goods and shortage of storage space at the premises of such manufacture, by an order, permit such manufacturer to store the input in respect of which Cenvat Credit has been taken, outside such factory, subject to such limitations and conditions as he may specify: provided that where such input is not used in the manner specified in these Rules for any reason whatsoever, the manufacturer of the final products shall pay an amount equal to the credit availed in respect of such input. Admittedly in the facts and circumstances, there is no case made out by Revenue that the appellant have not manufactured finished products from such inputs which were stored outside. Further, it is an admitted fact that the inputs stored outside were subsequently received back in the factory for which proper records are maintained as recorded in the Panchnama. Accordingly, I find that the show cause notice is not maintainable. Accordingly, I allow the appeal and set aside the impugned order. The appellant shall be entitl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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