TMI Blog2009 (8) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... S.H. KAPADIA and AFTAB, JJ. ALAM CIVIL APPEAL NO. 1308 OF 2008 WITH Civil Appeal No.1862 of 2006 Civil Appeal Nos. 5553 of 2009 - (Arising out of S.L.P. (C) No.4663 of 2009) Civil Appeal No.4169 of 2008 [Judgment per S. H. KAPADIA, J.] - Leave granted. 2. The short question which arises for determination in this batch of civil appeals is : whether the assessee(s) was required to reverse the CENVAT credit in terms of Rule 6(1) of Cenvat Credit Rules, 2002 on the quantity of LSHS which was used as "fuel" for producing steam and electricity, which, in turn, was used in or in relation to the manufacture of exempted goods, namely, fertilizers, during the disputed period(s). 3. For the sake of convenience we may refer to the facts in Civil Appeal No.1308 of 2008 - Commnr. of Central Excise v. M/s. Gujarat Narmada Fertilisers Co. Ltd. FACTS 4. The assessee is a manufacturer of excisable goods such as fertilizers, methanol, formic acid, nitric acid, aceptic acid, etc. out of which fertilizers were exempt from central excise duty under Notification No.6/2000-CE, dated 1.3.2002. The respondent functioned under CENVAT Credit Rules, 2002 ("2002 Rules", for short) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cept in the circumstances mentioned in sub-rule (2). (2)Where a manufacturer avails of CENVAT credit in respect of any inputs, except inputs intended to be used as fuel, and manufactures such final products which are chargeable to duty as well as exempted goods, then, the manufacturer shall maintain separate accounts for receipt, consumption and inventory of inputs meant for use in the manufacture of dutiable final products and the quantity of inputs meant for use in the manufacture of exempted goods and take CENVAT credit only on that quantity of inputs which is intended for use in the manufacture of dutiable goods. The manufacturer, opting not to maintain separate accounts shall follow either of the following conditions, as applicable to him, namely:- (a) if the exempted goods are,- (i) final products falling under Chapters 50 to 63 of the Schedule to the Central Excise Tariff Act, 1985 ; (ii) tyres of a kind used on animal drawn vehicles or handcarts and their tubes, falling within Chapter 40; (iii) black and white television sets, falling within Chapter 85; (iv) newsprint, in rolls or sheets, falling within Chapter heading No.48.01, the manufacturer shall pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edit in respect of any inputs, except inputs intended to be used as fuel, and manufactures such final products which are chargeable to duty as well as exempted goods, then, the manufacturer shall maintain separate accounts for receipt, consumption and inventory of inputs meant for use in the manufacture of dutiable final products and the quantity of inputs meant for use in the manufacture of exempted goods and take CENVAT credit only on that quantity of inputs which is intended for use in the manufacture of dutiable goods. 3. The manufacturer, opting not to maintain separate accounts shall follow either of the following conditions, as applicable to him, namely:- a. if the exempted goods are- i. goods falling within heading No. 22.04 of the First Schedule to the Tariff Act; ii. Low Sulphur Heavy Stock (LSHS) falling within Chapter 27 of the said First Schedule used in the generation of electricity; iii. Naphtha (RN) falling within Chapter 27 of the said First Schedule used in the manufacture of fertilizer; iv. Omitted. v. newsprint, in rolls or sheets, falling within heading No.48.01 of the said First Schedule; vi. final products falling within Chapters 50 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is clear that the said sub-rule imposes an obligation on the manufacturer when he is manufacturing dutiable and exempted goods to either maintain separate accounts qua inputs on dutiable and exempted goods or if he does not choose to do so he has to pay certain specified amount. In the alternative, learned counsel submitted that since LSHS was used for generation of electricity or steam it did not fall in the category of "inputs used as fuel" and consequently the assessee herein was required to maintain separate account or pay a certain specified amount under sub- rules (2) and (3) of Rule 6 of the 2002 Rules. 8. Shri S.K. Bagaria, learned senior counsel appearing on behalf of the assessee(s), submitted that inputs "intended to be used as fuel" have been specifically excluded from the obligations under Rule 6 of the CENVAT Credit Rules, 2002. According to learned counsel, inputs "intended to be used as fuel" have been specifically excluded from the requirement of sub-rule (2) by using the expression "except inputs intended to be used as fuel" and consequently the obligation of maintaining separate accounts and taking credit only on inputs intended for use in the manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture of the CENVAT scheme. Sub-rule (1), therefore, merely highlights that principle. Sub-rule (1) covers all inputs, including fuel, whereas sub-rule (2) refers to non-fuel-inputs. Sub-rule (2) covers a situation where common cenvatted inputs are used in or in relation to manufacture of dutiable final product and exempted final product but the fuel- input is excluded from that sub-rule. However, exclusion of fuel- input vis-`-vis non-fuel-input would still fall in sub-rule (1). As stated above, sub-rule (1) is plenary, hence, it cannot be said that because sub-rule (2) is inapplicable to fuel-input(s), CENVAT credit is automatically available to such inputs even if they are used in the manufacture of exempted goods. The cumulative reading of sub-rules (1) and (2) makes it abundantly clear that the circumstances specified in sub-rule (2), which inter alia requires separate accounting of inputs, are not applicable to the fuel- input(s). However, the said sub-rule (2) nowhere says that the legal effect of sub-rule (1) will stand terminated in respect of fuel-inputs which do not fall in sub-rule (2). In other words, the legal effect of sub-rule (1) has to be applied to all inputs inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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