TaxTMI 
TaxTMI 
2007 (1) TMI 455
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....de into the process of manufacture of refined edible oils as also from the scrutiny of records maintained by the appellants, it appeared to the department that the appellants were liable to pay, but had not paid, under Rule 6(3)(b) of CCR 2002, 8% of the price of the refined edible oils (unbranded) which had been cleared at 'Nil' rate of duty during March to December 2003. This finding was based on the fact that Cenvat credit had been availed on packing materials and chemicals which had been used as common inputs during the said period in relation to the manufacture of both dutiable final products (branded refined edible oils) and exempted final products (unbranded refined edible oils). 8% of the price of the exempted final products was estimated at Rs. 3,78,10,848/-. The department also noticed certain other "wrong" Cenvat credit availments by the appellants. Accordingly, show-cause notice dated 7-4-2004 was issued to the appellants demanding the aforesaid and other amounts (with interest thereon) and proposing penalties. The noticee contested the demands. In adjudication of the dispute, learned Commissioner passed the following order :- "(A) I demand Rs. 29,40,702/- (Rupee....
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....on 19-1-04 (S.No. 3 to Annexure D to SCN and para 21(2)(ii) above) iv. Rs. 15,810/- (Rupees Fifteen thousand eight hundred and ten only) being the excess credit taken during July, 2003 and appropriate the said amount already paid by the assessee on 23-1-04 (S.No. 4 to Annexure 'D' to SCN and Para 21(2)(viii) above) v. Rs. 68,461/- (Rupees Sixty eight thousand four hundred and sixty one only) being the excess credit taken during September, 2003 and appropriate the said amount already paid by the assessee on 23-1-04 (S.No. 5 to Annexure 'D' to SCN and Para 21(2)(ix) above). vi. Rs. 29,545/- (Rupees Twenty nine thousand five hundred and forty five only) being the excess credit taken during September, 2003 and appropriate the said amount already paid by the assessee on 23-1-04 (S.No. 6 to Annexure 'D' to SCN and Para 21(2)(x) above). vii. Rs. 2,28,562/- (Rupees Two lakhs twenty eight thousand five hundred and sixty two only) being the excess credit taken and appropriate the said amount already paid by the assessee on 23-1-04 (S.No. 7 to Annexure 'D' to SCN and Para 21(2)(xi) above). vii....
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....Excise Act, 1944. (H) I demand interest at appropriate rate on the amount demanded under Para 28B above as per Explanation II appended to Rule 6 of Credit Rules 2002 read with Rule 12 of the Rules ibid. (I) I demand interest on the amount of short payment of duty and also the re-credit taken in PLA as demanded under Para 28E and 28F above under Section 11AB of the Central Excise Act, 1944. (J) I impose penalty of Rs. 5000/- (Rupees Five thousand only) under Rule 27 of the Central Excise Rules, 2002 for the offences/contraventions as described under Para 22, 23 and Para 28E and 28F above. (K) I impose a penalty of Rs. 1,00,000/- (Rupees One lakh only) under Sub rule (1) of Rule 13 of the Credit Rules 2002 for the offences/contravention as detailed in Para 19, 21, 28A and 28D(i) to 28D(xi) above. (L) I impose a penalty of Rs. 10,00,000/- (Rupees Ten Lakhs only) under Rule 13 of the Credit Rules, 2002 for the offences/contravention described in Para 20, 21(2), 28B and 28C above. 2. In the present appeal, the appellants are contesting only the demand of dut....
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....ucts" and the capital goods in question were not to be considered to have been used for the manufacture of these goods, for purposes of Rule 6(4). It was argued that, for availing capital goods credit, the relevant date would always be the date of receipt of the capital goods in the factory. The capital goods in question were, admittedly, received in the appellants' factory during April 2002 to February 2003. During this period, admittedly, the capital goods were used exclusively for the manufacture of exempted final products and, on account of the bar created under Rule 6(4) of the CCR 2002, the appellants were not entitled to take credit of the duty paid on the capital goods. A right which was not available to the party on the relevant dates was inadmissible to them for ever and hence the appellants were not entitled to take credit of any part of the duty paid on the capital goods, as Cenvat credit later in the financial year on the ground that their final products became dutiable in that part of the financial year. In this connection, reliance was placed on the Tribunal's decision in Commissioner v. Surya Roshni, 2003 (155) E.L.T. 481 (Tri-Del), wherein eligibility for capital g....
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....she relied on the Tribunal's decision in BOC India Ltd. v. CCE, Chennai, 2003 (158) E.L.T. 47 (Tri-Kolkatta). 4.2 We have given careful consideration to the submissions on the issue. Admittedly, during a major part (April 2002 to February 2003) of the financial year (2002-03), the appellants' final product viz. refined edible oils were exempt from payment of duty of excise. It was only w.e.f. 1-3-2003 that these final products became dutiable. The capital goods in question had been received and installed in the factory during April 2002-February 2003 when the final products were not dutiable. The question now to be considered is whether, on account of the final products being dutiable in March 2003, the appellants were entitled to take Cenvat credit to the extent of 50% of the duty paid on the capital goods in terms of Rule 4(2)(a) of the Central Excise Rules, 2002. This provision of law reads as under :- "(2) (a) The CENVAT credit in respect of capital goods received in a factory at any point of time in a given financial year shall be taken only for an amount not exceeding fifty per cent of the duty paid on such capital goods in the same financial year : Provided that the ....
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....e (specified under the Rule) paid on any inputs or capital goods received in the factory on after the first day of March 2002. In respect of capital goods, it appears, they refrained from taking credit on or immediately after the dates of receipt of the capital goods in their factory, falling within the period 1-4-2002 to 28-2-2003. This was obviously because their final products viz. refined edible vegetable oils were chargeable to 'Nil' rate of duty under the Tariff during the said period. The fact that, during that period, their by-products were dutiable but eligible for value-based exemption from payment of duty under SSI Notification did not detract from this stance. The appellants, admittedly, started taking capital goods credit only from 1-3-2003, the date on which refined edible oils became dutiable under the 2003 Budget of the Central Government. The question to be considered is whether the right to take capital goods credit accrued to them on the dates of receipt of the capital goods in their factory or on the date on which their final products became dutiable. A similar question was considered by the Tribunal in the case of Surya Roshni (supra) and it was held as under :....
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....nancial year shall be taken only for an amount..." as "Cenvat credit in respect of capital goods received in a factory shall be taken at any point of time in a given financial year for an amount...". In our considered view, this construction of the provision by ld. counsel is not correct as it is not harmonious with Rule 3(1), wherein the right to take capital goods credit was conferred on a manufacturer/producer of final products, and Rule 6(4), which barred availment of credit on capital goods used exclusively in the manufacture of exempted final products. The nature of the benefit has to be gathered from the text of the provision of law which confers it on the beneficiary. Capital goods credit was allowed to the appellants by Rule 3(1) of the CCR, 2002, which allowed the manufacturer or producer of final products to take credit of specified duties of excise paid on any inputs or capital goods received in the factory on or after the first day of March 2002. This provision itself appears to have recognized the date of receipt of inputs/capital goods in factory as the 'relevant date' for a manufacturer of final products to exercise his right of taking Cenvat credit. Hence it is not....
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.....C.). It is certainly applicable to the present case for the reason which we have already recorded. 4.5 In the case of Ace Timez (supra) cited by learned counsel, neither the decision rendered in Surya Roshni (supra) nor the one rendered in Grasim Industries (supra) was placed before the Bench. Hence we are not in a position to follow the ratio of the decision rendered by the co-ordinate bench in Ace Timez (supra). 4.6 In the result, our decision on the issue goes in favour of the Revenue. Accordingly, it is held that the appellants were not entitled to take Cenvat credit, after 28-2-2003, of the duty paid on the capital goods received in their factory between 1-4-2002 and 28-2-2003. The demand of duty of Rs. 29,40,702/- stands confirmed against the appellants. 5. Issue No. 2 : Whether the appellants are liable to pay 8% of the value of the exempted final products cleared from their factory during March to December 2003, under Rule 6(3)(b) of the CCR 2002. 5.1 The submissions made by both sides on this issue call for a mention of the relevant aspects of the appellants' manufacturing activity. During the material period, they were engaged in the process of re....
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.... impugned order, ld. Commissioner found that the appellants had not maintained separate/proper accounts for receipt, consumption and inventory of inputs used in the manufacture of dutiable final products and exempted final products during the said period and, therefore, in terms of Rule 6(3)(b) of the CCR 2002, they were liable to pay to the Revenue 8% of the value (excluding sales tax and other taxes) of the exempted final product sold by them from their factory during such period. 5.3 Ld. Sr. Advocate submitted that the appellants had, in fact, maintained separate accounts in respect of inputs used in the manufacture of dutiable final products and those used in the manufacture of exempted final products during the above period in terms of Rule 6(2). They had not opted not to maintain such accounts and, therefore, Rule 6(3) was not applicable to them. As per the separate accounts maintained by them, the appellants had taken credit only on that quantity of inputs which was used in the manufacture of the edible oils cleared on payment of duty and had not taken similar credit on the inputs used in the manufacture of the exempted category of final products. A small amount of cre....
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....r, 2005 (187) E.L.T. 462 (Tri.-Del.) and the Supreme Court's judgment in Shyam Oil Cake Ltd. v. Collector, 2004 (174) E.L.T. 145 (S.C.). Ld. SDR pointed out that the appellants had not raised such a plea earlier and that, having availed themselves of the benefit of Notification No. 37/2003-CE from 30-4-03 in respect of the above product, they were not entitled to raise the plea. The Notification prescribed 'Nil' rate of duty for refined edible oils, if manufactured out of refined edible oil on which appropriate duty of excise under the CETA Schedule (where the input oil was procured indigenously) or Additional Customs Duty under the CTA Schedule (where the input oil was imported) had already been paid. Admittedly, the appellants enjoyed the benefit of this 'Nil' rate of duty for the refined edible oil obtained by de-odourisation and filtration of the duty-paid refined oil procured from other refineries. By doing so, they were virtually conceding that refined edible oils could be "manufactured" out of refined edible oils in terms of Note 4 to Chapter 15 of the CETA Schedule. Ld. counsel had no answer to this argument of Id. SDR. We have found substance in the SDR's submissions and, ....
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....ersed prior to issuance of the SCN. Thus, according to the appellants, they had opted to work under sub-rule (2) of Rule 6 of the CCR 2002. The Revenue has contested this claim. Reiterating the relevant findings of the Commissioner, learned SDR has submitted that separate accounts contemplated under Rule 6(2) were not properly maintained by the appellants during the period of dispute and, therefore, they were liable, under sub-rule (3)(b), to pay an amount equal to 8% of the price of the exempted final product sold by them during such period. The relevant provisions of Rule 6 are reproduced below :- "Rule 6. Obligation of manufacturer of dutiable and exempted goods. - (1) The CENVAT credit shall not be allowed on such quantity of inputs which is used in the manufacture of exempted goods, except in the circumstances mentioned in sub-rule (2). Provided..........rule. (2) Where a manufacturer avails....
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....ther titled "Film Ledger Account". Films Cenvat Ledger Account contains particulars of input (plastic film) procured from various suppliers and used in the manufacture of dutiable final products. These particulars are (1) Date (2) Name of supplier (3) Voucher No. (4) Narration (description of goods) (5) Quantity in Kgs. (6) Price rate per Kg. (7) Total price (in rupees) (8) Cenvat (in rupees) and (9) Cenvat credit (in rupees). Ld. counsel has explained that all the necessary particulars of input used in the manufacture of dutiable final products, including the amounts of Cenvat credit taken, were available from "Films Cenvat Ledger Account". The "Film Ledger Account" contains the particulars of plastic film procured by the appellants from various suppliers and used in the manufacture of exempted final products during the above period. All the above particulars except Cenvat credit are found in this account also. The appellants have also produced a tabular statement titled "FILM CONSUMPTION FOR EXEMPTED STOCK (MONTHWISE) AS PER CENTRAL EXCISE SCN". This statement contains particulars of monthwise consumption of plastic film for the period May to December 2003. It also incorporates p....