2018 (9) TMI 1481 - AT - Central Excise

Tribunal Grants Appeal, Emphasizes Supreme Court Precedent on Duty Liability

The Tribunal allowed the appeals, setting aside the impugned order, and granted consequential relief to the appellant. The decision emphasized the ... CENVAT credit - input used in manufacture of exempt as well as dutiable goods - exempted goods is a by-product - hydrol - reversal of proportionate credit - Rule 6(2) of CCR, 2003/2004 - case of appellant is that whether the exempted goods are by-products or final product will not make any difference in applicability of Rule 6 ibid as long as these goods are excisable goods and are exempted from payment of whole of duty of excise. Held that:- The issue is decided in the case of UNION OF INDIA & OTHERS VERSUS M/S. HINDUSTAN ZINC LTD. [2014 (5) TMI 253 - SUPREME COURT], where it was held that the rigor of Rule 6 is applicable in case of two joint final products and not in case of a final product and waste product or byproduct. The learned Commissioner (Appeals) has erred in not following the rulings of Hon’ble Supreme Court and in trying to distinguish the same, thus is guilty of not following the Articles 141 of the Constitution of India which provides – ‘the law declared by the Supreme Court shall be binding on all courts within the territory of India’. Appeal allowed - decided in favor of appellant. Issues involved:Whether the appellant, engaged in manufacturing dutiable products, is liable to pay duty on a by-product, hydrol, under Rule 6 of CCR, 2003/2004.Analysis:1. The issue revolves around the demand for duty under Rule 6 of CCR, 2003/2004 on a by-product, hydrol, generated during the manufacture of dutiable products. The Tribunal found that Rule 6 is clear about exempted goods, irrespective of whether they are by-products or final products, as long as they are excisable and exempt from duty. This differs from the previous Rule 57CC of CER, 1944, applicable when there were two different final products.2. The Commissioner (Appeals) differentiated between final products and by-products based on judgments of the Supreme Court in Gas Authority of India Ltd. and Hindustan Zinc Ltd. The Tribunal noted that these judgments apply to cases under the context of the previous rules and Acts. The Supreme Court emphasized that the intention to manufacture exempted products is irrelevant; what matters is the actual outcome during the manufacturing process.3. Referring to the Supreme Court's decision in Union of India vs. Hindustan Zinc Ltd, the Tribunal highlighted that the interpretation of Rule 57CC and Rule 6 of CCR 2004 is crucial. The Court emphasized that when common inputs result in two final products, one excisable and the other exempt, the provisions apply regardless of the manufacturer's intent.4. The Supreme Court's ruling emphasized that the emergence of a by-product as a technological necessity does not change its classification. The Court clarified that the terms used in the rules consider commercial reality, and applying Rule 57CC to final products and by-products would disregard the legislative distinctions. The Tribunal held that the Commissioner erred in not following Supreme Court rulings, violating the binding nature of Supreme Court decisions under Article 141 of the Constitution of India.5. Ultimately, the Tribunal allowed the appeals, setting aside the impugned order. The appellant was granted consequential relief in accordance with the law. The judgment emphasized the importance of following Supreme Court decisions and applying the relevant rules accurately to determine duty liability on by-products during manufacturing processes.