2023 (11) TMI 1163 - AT - Central Excise

Sugar factory and distillery under single registration deemed one unit, area-based exemption applies to all products

CESTAT New Delhi held that a sugar factory and distillery unit operating under single Central Excise registration constituted one unit despite separate ... Area Based Exemption - N/N. 50/2003-CE dated 10.6.2003 - denial of CENVAT Credit - denatured alcohol and CO2 manufactured by the distillery - sugar factory and the distillery unit - single or separate unit - alleged short reversal of CENVAT Credit under Rule 6(3A) for December 2014 - Time Limitation. Whether the sugar factory and the distillery unit were two units or one unit? - HELD THAT:- Various facilities of the company are treated as separate units under some laws and as one by some other laws and the concerned agencies deal with them accordingly. Merely because a separate licence was issued by the State Excise, Pollution Control, etc. for the distillery does not make it a different unit under the Central Excise. In this case, the appellant had obtained a single Central Excise Registration for the sugar factory and set up the distillery plant within its premises. Further, it also filed single returns with the excise department covering both the sugar plant and the distillery - it is thus found that the sugar factory and the distillery are one unit as far as the Central Excise is concerned. Central Excise Act, Rules and notifications should be applied accordingly. It has already been held by this Tribunal while remanding the matter that it is not tenable to hold that some products can avail area-based exemption and others need not avail area-based exemption. Once the appellant had opted for the area-based exemption notification, it is not open for it to say that it will not avail the benefit for some goods manufactured and will avail the benefit for other goods - As the exemption notification is not confined to only such products as were mentioned in the declaration but was available to all the goods manufactured in the unit including the new products manufactured after the declaration and those manufactured using newer plants and machinery installed in the unit, the exemption was available to the denatured alcohol and CO2. All assessees are required to self-assess and pay duty. If duty is paid in excess of what is due or paid when it is not due, the assessee can claim refund. There is no mechanism to refund suo moto the duty paid under the Central Excise law. There is also a mechanism of issuing a Show Cause Notice under section 11A to recover duty not levied, not paid, short levied, short paid or erroneously refunded. There is no provision to issue a notice under section 11A for any other purpose. For instance, if duty is paid where one is not to be paid, there is no provision to issue a show cause notice calling upon the assessee as to why the excess duty paid should not be refunded. If duty is short paid, a show cause notice can be issued by the officers and if it is paid in excess, the assessee has to file a refund claim. The denatured alcohol and CO2 manufactured by the distillery were fully exempted from duty and therefore, no CENVAT credit of capital goods used in setting up the plant could be availed by the appellant. CENVAT Credit - input services - denial as per notification no. 21/2014-CE (NT) which restricted availment of CENVAT credit to six months from the date of invoice - HELD THAT:- This notification came into force only from September, 01 2014. According to the appellant the invoices were issued prior to this date but it availed the CENVAT credit thereafter. If it be so, as per the settled legal position the appellant is entitled to CENVAT credit on all such of these invoices which were issued prior to September, 01 2014. Alleged short reversal of CENVAT Credit under Rule 6(3A) for December 2014 - HELD THAT:- It is held that the appellant is entitled to the benefit of CENVAT credit of Rs. 32, 82,816/- on all such invoices which were issued prior to 1 September, 2014 and according to the appellant all the invoices were issued prior to this date, there cannot be any duplication. The demand of Rs. 4,57,436/- needs to be upheld. Time Limitation - HELD THAT:- The show cause notice was issued on 4.01.2016 during which period the normal period of limitation was one year from the relevant date, i.e., the date on which the return is filed and if no return is filed, the last date on which the return has to be filed. Extended period of limitation was not invoked in the show cause notice or in the impugned order. Even the penalty under section 11AC was imposed as applicable to cases other than fraud, collusion, wilful misstatement or suppression of facts. The appellant received capital goods between 26.03.2013 and 2.11.2014 but availed CENVAT credit in December, 2014. The return for December, 2014 would have been filed in January, 2015 and the show cause notice was issued on January 04, 2016 within one year - there are no force in the submission of the learned counsel that the show cause notice was time barred. The impugned order needs to be modified to the extent of setting aside the denial of CENVAT credit on input services to the extent of Rs. 32,82,816/- for taking credit after six months from the invoice as there is no violation of notification no. 21/2004-CE (NT) consequent interest and reducing penalty under section 11AC to this extent - rest of the demand upheld - appeal allowed in part. Issues Involved:1. Whether the distillery unit and the sugar factory are separate entities for the purpose of Central Excise and CENVAT Credit Rules.2. Whether the appellant is entitled to CENVAT credit on capital goods and input services used in setting up the distillery unit.3. Whether the demand of Rs. 4,57,436/- is a duplication.4. Whether the demand was time-barred.Issue-wise Comprehensive Details:1. Separate Entities for Central Excise and CENVAT Credit Rules:The Tribunal held that the sugar factory and the distillery unit are one unit as far as Central Excise is concerned. The appellant had a single Central Excise registration and filed a single Excise Return for both the sugar factory and the distillery. The Tribunal stated, 'We, therefore, find that the sugar factory and the distillery are one unit as far as the Central Excise is concerned.'2. Entitlement to CENVAT Credit:The Tribunal noted that the appellant availed the area-based exemption notification and it is not tenable to claim the benefit of the exemption on some goods and not on others. The Tribunal stated, 'Once the appellant had opted for the area-based exemption notification, it is not open for it to say that it will not avail the benefit for some goods manufactured and will avail the benefit for other goods.' Consequently, no CENVAT credit on the capital goods used in setting up the distillery could be availed by the appellant.3. Demand of Rs. 4,57,436/-:The Tribunal found that the demand of Rs. 4,57,436/- on account of alleged short reversal of CENVAT Credit under Rule 6(3A) for December 2014 is not a duplication. The Tribunal upheld the demand stating, 'The demand of Rs. 4,57,436/- needs to be upheld.'4. Time-barred Demand:The Tribunal rejected the appellant's contention that the demand was time-barred. The Tribunal noted, 'The show cause notice was issued on 4.01.2016 within one year from the relevant date. We, therefore, find no force in the submission of the learned counsel that the show cause notice was time-barred.'Conclusion:The appeal was partly allowed. The denial of CENVAT credit on input services to the extent of Rs. 32,82,816/- was set aside, and the rest of the demand was upheld. The impugned order was modified accordingly.