Applicability of Rule 6 of CCR, 2004 to clearance of by-product at Nil rate of duty to be used in fertilizers

PJ/Case Laws/2011-12/1545

Case: NIRMA LTD. versus COMMISSIONER OF CENTRAL EXICSE, AHEMDABAD

Citation: 2012 (276) E.L.T. 283 (Tri – Ahmd.)

Issue:- Clearance of by-product Spent Sulphuric Acid following the procedure of Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 – whether provisions of Rule 6(3) (b) of CCR, 2004 applicable - Issue covered by earlier order of Tribunal in the case of same assessee – Rule 6 not applicable to by-products.

Brief Facts:- Appellants are engaged in Detergent Cakes/Powders and Fertilizers falling under Chapter 34 and 31 of the 1st schedule of Central Excise Tariff Act, 1985. During the course of manufacture of Detergent washing powder, a by-product spent Sulphuric acid emerged which is classifiable under Chapter Sub-heading 28070010. The said by-products was cleared on payment of duty and also cleared at nil rate of duty under Notification No. 4/2006- C.E., dated 1-3-06 which exempted sulphuric acid, oleum, oxygen and ammonia from payment of duty if used in the manufacture of fertilizer and where such use is elsewhere than in the factory of production, the exemption shall be allowed if procedure set out in the Central Excise (Removal of goods at Concessional Rate of duty for manufacture of Excisable Goods) Rules, 2001 is followed.

Respondent had cleared the goods viz., spent sulphuric acid, at nil rate of duty for use in the manufacture of fertilizer by following the procedure under the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001.

Department issued show cause notice dt. 12-03-09 (covering the period Jan.06 to March 08 involving amount of Rs 1, 61,410/-) and Show cause notice dt. 26-03-09 (Covering the period Apr.08 to Feb.09 involving amount of Rs 2,60,506/-) to appellant on the ground that the goods manufactured by them are not covered under Rule 6(3) (a) of the Cenvat Credit Rules, 2004 and therefore in terms of Rule 6(3) (b) of the Cenvat Credit Rules, 2004 they proposed reversal of 10% of the price of the goods excluding the taxes paid on such goods at the time of clearance. Penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11 AC and interest under Section 11 AB of the Central Excise Act, 1944 was also proposed.

The Adjudicating Authority confirmed the demand of duty with interest and penalties equal to demand was also imposed on the appellant. Aggrieved by the said order of original adjudicating authority, Revenue filed the appeal before Commissioner (Appeals), who rejected the same.

Hence, Revenue is in appeal before the Tribunal.

Appellant’s Contention:- The Appellant contended that he is not disputing the fact that the issue is covered by the earlier decision of Tribunal. However Appellant observed that the Tribunal Order relied upon on Hon’ble Mumbai High Court judgement in the case of M/s Rallis India Ltd. [2009 (233) E.L.T301 (Bom.)], which was misplaced

Respondent’s Contention:- The respondent contended that the Appellant also manufacture Spent Sulphuric Acid which is cleared as dutiable as well as exempted products and since the separate accounts of inputs used in the said final products are not maintained, the appellant is required to reverse 10% of the value of such exempted clearance of Spent Sulphuric Acid as per Rule 6(3) (b) of Cenvat Credit Rules 2004.

Reasoning of Judgment:- The Tribunal found that the issue is no res integra and stands settled by earlier order of Tribunal in the case of same appellant, being Order No. A/2350/WZB/AHD/2009, dt. 12-11-09 [2010(261) E.L.T. 635 (Tri- Ahmd). The said order was subsequently followed by the Tribunal in the Case of CCE, Vadodara v. M/s Nirma Ltd., being Order No. A/1810-1812/WZB/AHD/2010, dt. 15-7-10. In the said judgment it was held that when in clearing spent sulphuric acid, the procedures under the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001 was followed, then there is no requirement of payment of 10% of value of exempted goods at the time of clearance of the same. It was held that provisions of Rule 6 are not applicable to by-products.

It was noted that the Commissioner (Appeal) had granted unconditional stay on the earlier order mentioned herein above passed in assessee’s own case. However, while passing the order in main appeal, the appellate authority has not followed the earlier order.

The Tribunal noted that the Commissioner (Appeal) is not disputing the fact that the issue is covered by the earlier decision of the Tribunal. But has observed that the Tribunal’s order in the case of M/s Rallis India Ltd [2009 (233) ELT 301 (Bom)] which was misplaced.

But the Tribunal found that as contended by the ld. Advocate appearing for the appellant, if the Revenue was aggrieved with the earlier order of Tribunal, it was open for them to file appeal there against before higher appellate forum. Reference in this regard may be made to Hon’ble Mumbai High Court’s judgment in the case of CCE, Nasik v. M/s Jain Vanguard Polybutlene Ltd. as reported in 2010 (256) E.L.T. 523 (Bom.) as also the Tribunal decision in the case of M/s Gujarat Composite Ltd. v. CCE, Ahmedabad as reported in 2006 (195) E.L.T. 310 (Tri.-Mum.). As such, it was not open to the Commissioner (appeals) to take a different view when an identical issue was decided in the same party’s case by the earlier order of Tribunal. The Tribunal concluded that the Commissioner (Appeal)’s reference to Hon’ble Supreme Court’s Judgment in the case of M/s Nirma Chemical Works [2002 (145) E.L.T. 485 (S.C.)] was on altogether different ground as it deal with classification of Spent Sulphuric Acid and has got nothing to do with the provision of Rule 6(3) of Cenvat Credit Rules. Impugned order set aside.

Decision:- Appeal allowed with consequential relief.

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PJ/Case Laws/2011-12/1545

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