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TMI Blog2009 (3) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal filed by the respondent and set aside the order dated 31st December, 2003 passed by the Commissioner, Central Excise (Appeals), Kolkata, confirming the adjudication order dated 4th December, 2000 passed by the Assistant Commissioner of Central Excise, Chandannagar Division. The appeal was admitted to decide the following question of law: (1) "Whether the respondent is entitled to avail Modvat credit on the input in the manufacture of final product on the part of which no duty is paid as supplied under Chapter X Procedure without maintaining separate inventory". 2. The input involved in the instant case is Light Diesel Oil (hereinafter referred to as LDO) which was used by the respondent in generation of electricity by diesel g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 944. Since the contention of the respondent was not accepted by the department the department demanded short paid Central Excise duty of a sum of Rs. 4,82,904/- being equal to 8% of the price of 10.74 M/Tons of Sulphuric Acid removed from the said factory under Chapter X Procedure without payment of duty. The order of the Assistant Commissioner dated 4th December, 2000 was challenged by the respondent but it was upheld by the Commissioner of Central Excise (Appeals) IV, Kolkata by his order dated 31st December, 2003. Against that the respondent preferred an appeal before the Customs, Excise and Service Tax Appellate Tribunal, Kolkata (CESTAT). 3. Mr. Arindam Sinha, learned Advocate appearing for the appellant drawing our attention to the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Rules must necessarily be given a positive meaning as in the definition of inputs in the aforesaid Rule 57B(i)(iii) which does not correspond to LDO being used for the purpose of generation of electricity, used for manufacture of final products of Rayon Yarn and Sulphuric Acid as has been declared by the respondent itself. It being the admitted position that LDO was used by the respondent to generate electricity for the purpose of manufacture of, inter alia, Sulphuric Acid the respondent cannot contend that LDO was an input used as fuel, thus exempted. Maintenance of separate inventory for use of such input when partly used for the manufacture of a final product on which no duty is paid is not exempted under Rule 57CC. As such Mr. Sinha s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise leviable thereon or chargeable to nil rate of duty the manufacturer is not under any obligation to maintain separate inventory and accounts of the receipts and use of inputs for the aforesaid purpose and shall not take credit of the specified duty paid on such inputs. According to Mr. Chakraborty Rule 57CC both under sub-rules (1) and (9) thereof inputs used as fuel have been kept aside the purview of the said provisions. Since admittedly the respondent used the inputs as fuel for the purpose of generation of electricity relating to production of Viscose Rayon Yarn and Sulphuric Acid, there is no obligation to maintain separate inventory and books of account if the Sulphuric Acid manufactured in the factory premises is removed to an o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... X Procedure without maintaining separate inventory of LDO which is legally valid and proper in accordance with relevant provisions including Rule 57CC of the said Rules. Rule 57B speaks about the MODVAT credit available on the inputs used in the manufacture of both dutiable and non-dutiable final products and Rule 57CC(3) specifically provides that the provisions of Rule 57C(2) shall not apply to inputs intended to be used as fuel. Rule 57CC(1) does not apply when inputs are used as fuel and therefore, Rule 57CC Sub-Rule (9) has no application where the inputs are used as fuel. Therefore it can be safely concluded that sub-rules (1) and (9) of Rule 57CC have been kept outside the purview of the said provisions because in the instant case i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout payment of duty cannot be denied the benefit of MODVAT credit because the respondent removed Sulphuric Acid from its factory premises to another factory premises of its own following Chapter X Procedure without complying with the provisions contained in Rule 57CC(1) and (9) of the Central Excise Rules. In fact, those Rules are not applicable when the inputs are used as fuel. Therefore, the respondent cannot be held liable for violation of any Rule contained in the Central Excise Rules and accordingly the imposition of penalty to the tune of Rs. 4,82,904/- by the Assistant Commissioner, Central Excise, is bad in law as also the order passed by the Commissioner affirming the said order. It is true, that the decisions cited by the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X
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