Feedback   New User   Login      
Tax Management India. Com TMI - Tax Management India. Com
Acts / Rules Notifications Circulars Tariff/ ITC HSN Forms Case Laws Manuals Short Notes Articles SMS News Highlights
        Home        
Extracts
Home List
← Previous Next →

Dhampur Sugar Mills Ltd. Versus Commissioner of Central Excise, Meerut-II (now Hapur)

2017 (2) TMI 1279 - CESTAT ALLAHABAD

CENVAT credit - molasses used in manufacture of Rectified Spirit - Held that: - the method of proportionate reversal adopted by the appellants, cannot be faulted with and FIFO method cannot be followed as per the wish of the Revenue. Further, rectified spirit, though not excisable, Rule 6(2) is not applicable - demand set aside. - Diversion of clearance of inputs as such - Molasses were transferred to another company without the permission of the Department - Held that: - Rule 8 of CCR provi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ut 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 pr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

l 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 this amount is ₹ 25,48,951/- and the second issue is demand of ₹ 20,29,755/- which have been confirmed on the ground that molasses were transferred to another company without the permission of the Department. Further, penalty have been imposed on .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Qty. Acetic Acid 58755.167 58490 0 58490 (+) 265.167 (say 265) Acetic Anhydride 14936.067 14035 831 14866 (+) 70.067 (say 70) Acetaldehyde 68094 65155 0 65155 (+) 2939 3. Statement of Mr. Chandra Prakash Singh the General Manager of the unit was taken under Section 14 of the Act, wherein he stated that in respect of Acetic Acid and Acetic Anhydride, the difference was mainly due to temperature variance at the time of stock taking. In respect of Acetaldehyde he accepted that 2939 kgs was excess i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

xcess of RG1. However, as 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 evid .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

manufactured by the appellants from molasses on which they had taken Cenvat Credit. The amount of duty shown against these items is in fact Cenvat Credit involved on molasses which had been used in manufacture of said quantities of the goods. It appeared to Revenue that in respect of some goods, as mentioned above, shortage in the stock had been found at the time of stock taking and no proper justification was offered for the same. The duty payable on such shortage amounted to ₹ 12,831/- + .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t NIL rate of duty (as tariff rate on Rectified Spirit being nil). As such it appeared that the appellant was liable to pay under the Provisions of Rule 6(3)(a)(i) of CCR the proportionate amount attributable to the credit involved on the inputs/input services (molasses) used in the manufacture of Rectified Spirit cleared or sold at nil rate of duty. It further appeared that major part of the Rectified Spirit is used in manufacture of dutiable goods while a small part is cleared or sold at nil r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

005 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 exclusivel .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ectified Spirit which had been cleared/sold by them at nil rate of duty was manufactured from the molasses on which duty had been paid at lower rate i.e., @ ₹ 500/- per MT or at nil rate of duty (in respect of molasses received from M/s DSM Kashipur) in order to pay less amount under Rule 6(3)(a)(i) of CCR, 2004. It is relevant to mention that prior to 28 February, 2005 the duty rate applicable on molasses was @ ₹ 500/- per MT and with effect from 01 March, 2005 the rate was increase .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e. @ ₹ 1000/- PMT had been paid and being received and consumed by them simultaneously. It was also noticed that appellant had no separate storage tank for the above mentioned two types of molasses. Thus, it appeared that on the basis of notional bifurcation of stock of molasses appellant had paid reversed the amount of Cenvat Credit @ ₹ 500/- PMT under Rule 6(3)(a)(i) of CCR, 2004 on molasses used in the manufacture of rectified spirit cleared/sold at nil rate of duty till 02 June, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f the said molasses in RG 23A Part-1 Register (page no.1 to 18 of RUD-3) separately. It have been shown therein that with effect from 03 June, 2005 only the said exempted molasses have been used by them in manufacture of rectified spirit sold at nil rate of duty. It appeared to Revenue that since appellant was not utilising said exempted molasses exclusively 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

able or exempt were being stored collectively in these tanks, and no separate storage was being maintained by them in respect of the exempted molasses. It appeared that appellant had maintained several RG 23 A Part-1 register in order to manipulate the separate receipt and disposal of molasses received from exempted unit - DSM Kashipur and/or from other sugar units, wherein molasses taxable. Since the appellant was not physically maintaining separate storage of these two varieties of the molasse .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r, as the plant of the appellant is a continuous plant and rectified spirit and other goods had been manufactured therein simultaneously. In his statement dated 10 November, 2005 Shri C.P. Singh GM Commercial of appellant in response to query whether they produced rectified spirit separately, that is one for sale, another for captive consumption, he stated that rectified spirit was produced and stored commonly. It further appeared that appellant was required to pay the amount attributable to Cen .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

asses 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) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the FIFO method the amount of Cenvat Credit reversed under Rule 6(3)(a)(i) of the CCR, 2004 is as follows: - Date/Month Sale of R.S in B.L.* **Recovery in B/L i.e. qnty. Of R.S manufactured from one quintal of molasses Molasses contained in said R.S. in qtls i.e. col. 2 / col. 3 Reversal rate Rs./ qtls Cenvat required to be reversed Ed. Cess required to be reversed Cenvat reversed Ed.Cess reversed 1 2 3 4 5 6 7 8 9 20.05.05 to 31.05.05 220000 21.78 10101.01 100 1010101 20202 505037 10100 June-05 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rdingly, 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

h was diverted by them to DSSL and the said transfer was done by appellant without reversal of credit. As per Rule 3 and 4 of CCR, 2004 appellant was required to reverse the amount of Cenvat Credit involved on the said 25,964.50 Qtls. of molasses. The total Cenvat Credit involved was worked out at ₹ 20,29,755/- as per the register which was resumed at Sr. No. 25 of Annexure B to the Panchnama. The said register have been named as Invertose Sheera . It also appeared that the old name of M/s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ses to M/s DSSL was not shown in their RG 23 A Part-1registers and no document had been issued for the said clearances. From the explanation given, it appeared that they have never obtained any permission from the Central Excise Department for such storage of raw material in another unit. Further as per register (RUD-5) 26,188.60 Qtls. of molasses had been shown as received by appellant from M/s DSSL, but without any proper documents between 19. July, 2005 to 12 August, 2005 (only details of suc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

was proposed to be demanded and recovered and also with proposal to appropriate from the amount of deposit already made with further proposal to impose penalty, further Cenvat Credit of ₹ 25,48,951/- involved on the molasses used in manufacture of rectified spirit cleared as such at nil rate of duty was proposed to be recovered under Rule 14 of CCR read with Section 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 app .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mount of penalty was imposed under Rule 15 of CCR read with section 11 AC of the Act. Being aggrieved the appellant preferred appeal before learned Commissioner (Appeals) who vide the impugned Order-in-Appeal dated 30 December, 2008 was pleased to dispose of the cross appeals arising from the common Order-in-Original. The appellant assessee had challenged the Order-in-Original as regards all the demands raised along with penalty and redemption fine, whereas the Revenue is in appeal on short levy .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y of ₹ 13,087/- on the duty confirmed on the quantity of goods found short at the time of inspection. 14. The learned Commissioner (Appeals) taking notice of the provisions of Rule 10 of CER, 2002, Rule 25 of CER, 2002 found that the appellant in their submissions have indicated that the variation in the stock is very nominal and had accepted the variation in stock and attributed this to be due to variation in temperature. Variation in temperature was not taken into account during verifica .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

llant 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 with Rule 9 it was held that duty of ₹ 20,29,755/- is rightly demanded. As regards the Revenue appeal, the learned Commissioner has observed that the preventive officers detected the violations in the course of investigation, wherein the appellant deposited ₹ 12,323/- against due amount of ₹ 13,087/-. The appellant ha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lants submitted that molasses were used for manufacture of rectified spirit. They received molasses from three categories, namely, first received on payment of duty, second one comes from a unit which is availing area based exemption and the third category is the molasses manufactured by the unit themselves. These are stored in five tanks, and as per Rule 6 (2) of CCR, 2004, they are required to maintain separate accounts and they are maintaining separate accounts. The dispute is only about the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and thereafter some portion of rectified spirit is denatured, and is cleared on payment of duty. Therefore, they would not be knowing the exact quantum of rectified spirit, which was denatured at any given point of time. In view of the above facts, he submitted that it is not possible for maintaining their accounts by following the FIFO method as done by the Revenue. As regards the second issue, he submits that because of shortage of storing space they had stored some of the molasses outside the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e 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 th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d as such. Such facts are not obtaining in the facts and circumstances and as such the demand of ₹ 20,29,755/- is fit to be set aside. So far the confirmation of duty and confiscation for the discrepancy and shortage or excess found, at the time of inspection, the learned counsel demonstrated that such difference and/or discrepancy is less than 10% and in some cases, even less than 5%. Further, the cogent explanation given for the shortage or difference was not found untrue and the order o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

terms of Rule 8 read with Rule 3(5) of CCR, 2004. The learned counsel for the appellant also makes an alternate submission that the provision of Rule 6(2) of CCR are not applicable in view of the fact that rectified spirit is not at all excisable and the Rule is applicable only when goods are exempted or attract nil rate of duty. 17. Having considered the rival submissions, I find that so far the order of confiscation and demand of duty on the raw materials and finished goods found short/excess, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

Discussion Forum
what is new what is new
 


Share:            

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version