2023 (8) TMI 121

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.... of refining the crude oil in their refinery through fractional distillation to produce products like Motor Spirit, High Speed Diesel, Superior Kerosene Oil, Aero Turbine Fuel, Liquid Petroleum Gas etc.. 3.1 The respondent initially paid the amount equivalent to the CENVATE credit attributable to inputs and input services used in relation to the manufacture of exempted clearance of petroleum product namely Liquefied Petroleum Gas (LPG). The equivalent CENVATE credit was paid in terms of Rule 6(3)(ii) of the CENVATE Credit rules, 2004. The respondent thereafter filed application seeking for refund of amount of Rs. 3,97,18,590/- as paid above in respect of exempted clearance of LPG under Rule 3 of the CENVATE rules. It was in respect of period indicated. 3.2 The refund sanctioning authority took the view that the amount was rightly paid and the refund was not liable to be granted. The Deputy Commissioner, Central Excise and Services Tax issued show cause notice dated 1.9.2014 to the respondent proposing to reject the refund claim. Thereafter, the Commissioner of Central Excise and Service Tax, Mumbai, passed Order-in-Original dated 9.3.2016 to reject the refund claim of the app....

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....hether the Appellate Tribunal was right in allowing additional new grounds filed by the Respondent that Liquefied Petroleum Gas is a Byproduct and therefore Rule 6 has no application in the case of Liquefied Petroleum Gas? IV. Whether the Appellate Tribunal was right in holding Liquefied Petroleum Gases as a byproduct of petroleum refinery and not as a joint product with other petroleum produces that emerge by chemical reaction/fraction of common blend of raw material ?" 4. While the rival submissions were advanced and learned advocate for the appellant department raised several contentions as pleaded in the memorandum of appeal, there is no gainsaying that in the similar set of facts and involving identical issue in the Principal Commissioner, Central GST and Central Excise vs. M/s. Reliance Industries Ltd. being Tax Appeal No. 219 of 2022 came to be decided by the Division Bench of this court on 5.5.2022. It arose out of the order of the Central Excise Tribunal rejecting the refund claim of the several respondents with regard to the CENVATE credit reversed/paid for the inputs attributable to LPG products in terms of rule 6(3)(ii) of the CENVATE Credit Rules for the pe....

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....able final product) using a lesser quantity of hydrochloric acid, Rules 6(1) and 6(2) of the CCR would not come into play. The relevant observations of this Court are extracted herein below for ease of reference: "8. Thus, on a plain reading sub-rule (1) of Rule 6, it is apparent that CENVAT credit is admissible in respect of the inputs used in the manufacture of dutiable goods and is inadmissible on such quantity of inputs which is used in the manufacture of exempted goods. Sub-rule (2) imposes an obligation on the manufacturer who manufactures final products and exempted goods from the common input to maintain separate accounts for receipt, consumption and inventory of inputs. Examining the applicability of the aforesaid rules to the facts of the present case, as noted hereinabove, it is not as if more quantity of Hydrochloric Acid is used than that required for manufacturing Gelatin or that by using a smaller amount of Hydrochloric Acid, the production of Mother Liquor could be averted. In the manufacturing process adopted by the assessee, it is not possible to manufacture Gelatin without Mother Liquor coming into existence. .................... When the entire quantity....

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....ries Limited, 2008 (232) ELT 193 (SC) held that if the dutiable final product could not have been manufactured using a lesser quantity of inputs, then the entire input must be attributed to having been used in the manufacture of the said dutiable final product, even if some other exempt final product emerges, inevitably. This is also the ratio of the judgment of the Apex Court in the case of Swadeshi Polytex Ltd. vs. CCE reported in 1989 (44) ELT 794 (SC). The relevant observations of the Apex Court are reproduced herein below for ease of reference - "20................It is clear, therefore, that the Tribunal failed to interpret the words of the exemption notification No. 201/79 properly and fully. The said notification exempted all excisable goods on which the duty of excise was leviable and in the manufacture of which any goods falling under Tariff Item 68 (i.e. inputs) had been used from so much of the duty of excise leviable thereon as was equivalent to the duty of excise already paid on the inputs. It is clear, however, that ethylene glycol was used in the manufacture of polyester fibre. It appears that methanol arises as a part and parcel of the chemical reaction du....