2018 (12) TMI 1170

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.... Service Tax, Raigad in dropping of demands in seven show cause notices by erroneously placing reliance on the decision of the Hon'ble Supreme Court in civil appeal no. 1822-1823 of 2002 dated 13th November 2007 in their own matter and the entitlement to the entirety of CENVAT credit on inputs that were used in manufacturing even though waste or by-product emerged in the production process. 2. The seven show cause notices for September 1998 and covering the period from October 2001 to August 2004 invoked rule 6 of CENVAT Credit Rules, 2002 (and the erstwhile rule 57CC of Central Excise Rules, 1944) to enforce remittance of Rs. 55,44,35,386 on the value of clearances of 'lean gas' manufactured by M/s Gas Authority of India Ltd along with ....

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....such lacuna as pointed out by the Hon'ble Supreme Court is not attracted in the present notices except for the demand pertaining to September 1998. Relying upon the decision of the Tribunal in ONGC v. Commissioner of Central Excise [1989 (42) ELT 420 (T)], he submits that 'lean gas' was held to be manufactured exciseable goods. Referring to the memorandum of cross-objections filed by the assessee, he asserted the right of Revenue to take a contrarian position vis-à-vis the decision of the first appellate authority that had not been appealed against for any reason whatsoever. 4. Learned Counsel for respondent questioned the propriety of this challenge by Revenue despite approval of the Hon'ble Supreme Court to the setting aside of ....

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....he simple reason that on the facts of the present case, as can be seen from the extract quoted from the show cause notice, which is the foundation of the Demand made by the Department, Lean Gas is a by-product which emerges when LPG is extracted from natural gas. If the case of the Department itself in the show cause notice was that Lean Gas is a by-product, then we fail to understand as to the basis for denying the benefit of Modvat credit to the assessee during the relevant period (October 1998 to January 1999) under Rule 57D. 7. As repeatedly held by this Court, show cause notice is the foundation of the Demand under Central Excise Act and if the show cause notice in the present case itself proceeds on the basis that the product in qu....