TMI Blog2021 (5) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... sulphate obtained from mother liquor is a by-product and the provisions of Rule 57CC(1) of the erstwhile Central Excise Rules, 1944, equivalent to Rules 6(2) and 6(3) of the Cenvat Credit Rules, 2004, is inapplicable and cenvat credit of inputs contained in such by-product was permissible. The facts and the issues contained the decisions of the Apex Court and the Tribunal are, on perusal of the impugned orders, the adjudication orders and the documents on record of the present proceedings are found to be the same and hence the said decisions are fully applicable to the instant cases - credit allowed. Whether demand in terms of Rule 6(3)(i) of the Cenvat Credit Rules is appropriate as the appellant availed cenvat credit on common inputs which were used in or in relation to, either directly or indirectly in the manufacture and clearance of dutiable final products as well as exempted final products, namely ammonium sulphate and CO gas, where the appellant had exercised option to follow Rule 6(3)(ii) of the Cenvat Credit Rules in terms of Rule 6(3A) and whether non-acceptance thereof by the Department was correct? - HELD THAT:- There is no dispute nor denial in either the show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Cenvat Credit Rules, have been rejected. The periods involved in the instant appeals are from August 2010 to February 2011 and August 2010 to March 2011. 2. The facts in brief of the cases, involving common issues, are: (a) The appellant, an integrated steel plant manufactures various iron, steel and allied products falling under various Chapter Headings of the First Schedule to the Central Excise Tariff Act, 1985 at its said steel plant in Durgapur, West Bengal. The appellant has five coke oven batteries, each having 78 ovens and one coke oven having battery of 39 ovens which are used to convert coal into coke. During the process of conversion of coal into coke, at very high temperatures, Coke Oven Gas ( CO gas ), a very poisonous and harmful gas is generated. Hence it is not permitted to be let out in the air as per environmental law. (b) The Raw CO gas contains various contaminants, such as Tar Vapour, Light Oil Vapour (consisting mainly of Benzene), Toluene and Xylene, Naphthalene Vapour, Ammonia Gas. The Raw CO gas generated is sucked by the exhauster from the Coke oven battery and is sent to the Coal Chemical Plant to extract high value by-products like Na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices for reversal. There was no common input service used during the earlier years. (e) On 17.08.2011 a show cause notice was issued by the Additional Commissioner, alleging that the appellant had manufactured and cleared an exempted product, Coke Oven Gas, falling under Tariff Item 27050000 of the Central Excise Tariff which had been manufactured using different common cenvatable inputs and input services but without maintaining separate accounts as required under Rule 6(2) of the Cenvat Credit Rules and without payment of amounts as required under Rule 6(3)(i) of the Cenvat Credit Rules and called upon the appellant to show cause as to why a sum of ₹ 11,79,415/-, being 5% of the value of the said goods, should not be demanded and recovered from the appellant, along with interest, for the period August 2010 to March 2011 in respect of ammonium sulphate cleared during the said period and why penalty should not be imposed upon the appellant. (f) A similar show cause notice was issued on November 8, 2011 by the Additional Commissioner, alleging that during the period August 2010 to February 2011 the appellant had manufactured and cleared exempted product, Ammonium Sul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic Alum, Caustic Soda, HCL and Ion Exchanger, used as a water treatment chemicals and contained in the steam used as a fuel for running exhauster, are not used in or in relation to generation of CO gas. Hence these are not inputs covered by Rule 6 of the Cenvat Credit Rules. (iv) Ammonium sulphate in Coal Chemicals Plant is manufactured in two plants. In 1.0 MT stage coke oven gas containing ammonia is passed through Saturator Acidic Bath (3% to 4% sulphuric acid) and salt crystals are lifted by compressed air. In 0.6 MT stage, ammonia from coke oven gas is recovered by spraying acidic liquor of varying concentration (1.5% to 10.0% H2SO4). Mother Liquor is fed to evaporator crystallizer for making ammonium sulphate. No other chemicals or fuel is used. (v) In an integrated steel plant the final product is iron and steel. Ammonium sulphate gets produced only because of the fact that CO gas cannot be let into air as it contains ammonia, an hazardous product and hence cannot be discharged as per prevailing environmental laws. The CO gas recovered in the form of ammonia gas is highly corrosive in nature. Without extracting ammonia from the coke oven gas the said gas cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner to, inspite of an assessee exercising option in terms of Rule 6(3)(ii) during a financial year, ignore the same and proceed to initiate proceedings and/or confirm a demand of an amount in terms of Rule 6(3)(i) of the Cenvat Credit Rules. The Additional Commissioner has, therefore, acted patently without jurisdiction and contrary to the powers conferred upon him under the Act in passing the adjudication order. Consequently, both the adjudication order and the impugned order are contrary to law and untenable. (x) In support of this contention reliance has been placed on the following decisions: (i) Tiara Advertising Vs. Union of India, 2019 (30) GSTL 474 (Telengana) (ii) Reliance Life Insurance Co. Ltd. Vs. Commissioner of Service Tax, 2018 (363) ELT 1050 (T) (iii) Etrans Solutions Pvt. Ltd. Vs. Commr. of CGST C.Ex., 2020 (372) ELT 867 (T). (xi) For this reason also the impugned orders are liable to be set aside. 4. Mr. A. Roy, the learned AR, appearing for the Department, while reiterating the findings in the adjudication and appellate orders, referred to two Order-in-Appeals, both dated 24.08.2018, passed by the Appellate Authority on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id to status of final product. In paras 21 to 26 of the judgment it has been held by the Hon ble Supreme Court as under: 21. As already pointed out, argument of the learned Solicitor General was that Rule 57CC and Rule 6 of the Modvat/ Cenvat Rules respectively require the literal rule of interpretation which needs to be applied, as the language of these was unambiguous in this behalf. We may record that as per the learned Solicitor General, the provisions of Rule 57CC or Rule 6 envisage common use of inputs in two final products i.e. one dutiable and other exempted from the applicability of the same. He submitted that when two final products emerge out of use of common inputs, one excisable and the other exempt, the provisions will apply. The question of intention of the assessee to manufacture the exempted product is not relevant. It may be intended or unintended but if what results in the course of a manufacturing process is a final product falling within the meaning of the said provisions, the provisions will apply in full with the attendant consequences. He also argued that Rule 57D uses the words 'waste and refuse' alongwith by-products . The word 'by-p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be relied on by the respondent. 24. While pleading that the aforesaid interpretation to these Rules be accepted by this Court, submission of Mr. Parasaran was that in such an eventuality the judgment in the case of Swadeshi Polytex Ltd. v. CCE; 1989 (44) ELT 794 was not applicable, nor was the judgment in CCE v. Gas Authority of India Ltd.; 2008 (232) ELT 7 relied upon the by the respondent. Likewise his submission was that judgment of the Bombay High Court in the case of Rallis India Ltd. v. Union of India; 2009 (233) ELT 301 was erroneous wherein view taken is contrary to the aforesaid submission. 25. These arguments may seem to be attractive. However, having regard to the processes involved, which is already explained above and the reasons afforded by us, we express our inability to be persuaded by these submissions. We have already noticed above that in the case of Birla Copper (C.A. No. 2337 of 2011) the Tribunal has decided the matter following the judgment in the case of Swadeshi Limited (supra). In that case, Ethylene Glycol was reacted with DMT to produce polyester and ethanol. Methanol was not excisable while Polyester Fibre was liable to excise duty. Cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal has held that ammonium sulphate obtained from mother liquor is a by-product and the provisions of Rule 57CC(1) of the erstwhile Central Excise Rules, 1944, equivalent to Rules 6(2) and 6(3) of the Cenvat Credit Rules, 2004, is inapplicable and cenvat credit of inputs contained in such byproduct was permissible. 7.3 The CO gas issue is settled by the decision of this Bench of the Hon ble Tribunal in the case of Tata Steel Ltd. Vs. Commissioner of Central Excise Service Tax , being Order No. FO/A/76193/2019 dated June 26, 2019 passed in Excise Appeal No. 66 of 2010-DB. The Division Bench of the Tribunal, following the decision of the Hon ble Supreme Court in the case of Union of India Vs. Hindustan Zinc Limited (supra), held as under :- 9.2.1 On application of the afore quoted observation of the Hon ble Supreme Court to the instant case, we find that herein also it is an undisputed fact that the entire quantity of coal is completely utilized for production of coke and no part thereof forms a part of the coal gas or coal tar, which inevitably comes into existence as a technological necessity. Here also the appellant cannot use lesser quantity of coal only to produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has to comply with conditions and procedure under Rule 6(3A). Hence, the adjudicating authority has no right or authority to require the appellant to make payment in terms of Rule 6(3)(i), inspite of the fact that the relevant materials on records clearly evidencing not only the appellant intimating the prescribed jurisdictional Central Excise authority, as per Rule 6(3A)(a), the fact of exercising of option under Rule 6(3)(ii) and providing the particulars as required in the said sub-clause (a), and complying with the requirement laid down in Rule 6(3A)(c), (d) and (g) of the Cenvat Credit Rules. 8.2 Rule 6(3A) is a complete provision which not only provides for steps that can be taken in the event of non-compliance or incomplete compliance with the requirements laid down thereunder including the payments to be made in terms thereof but also the penal consequence that an assessee would be liable to. It also specifically provides that in the event of the reversal/payments not being effected by the assessee as per the said provision, the differential amount is to be recovered in the manner as provided for in Rule 14 of the Cenvat Credit Rules. There is no provision therei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon Rule 6(3)(i) and made the choice of the option thereunder for the petitioner, viz., to pay 5%/6% of the value of the exempted services. The statutory scheme did not vest the second respondent with the power of making such a choice on behalf of the petitioner. The Order-in-Original, to the extent that it proceeded on these lines, therefore cannot be countenanced. 8.4 There is no dispute nor denial in either the show cause notices or in the adjudication orders that the appellant had exercised option in terms of Rule 6(3)(ii) of the Cenvat Credit Rules. Once this fact, established from the materials on record, is not disputed, there can be no demand in terms of Rule 6(3)(i) of the Cenvat Credit Rules. 8.5 The finding that the appellant was required to pay much higher amount in terms of Rule 6(3) of the Cenvat Credit Rules other than that actual reversed is also without any merit. On plain reading of Rules 6(3) and (3A) it is seen that nowhere it is mentioned that an assessee should pay any amount higher than that of the actual amount calculated under the procedure prescribed under Rule 6(3A) of the Cenvat Credit Rules. The finding that the reversal of credit attributab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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