Molasses sludge arisen as waste during manufacture of dutiable goods, whether the credit of input service is admissible?

PJ/CASE LAW/2016-17/3194

Case-KANORIA CHEMICALS & INDUSTRIES LTD. VersusC.C.E., CUS. (ADJ.), SURAT-II

Citation-2016 (43) S.T.R. 306 (Tri. - Ahmd.)

Brief Facts-The appellants were engaged in the manufacture of Denatured Ethyl Alcohol (DEA), which is a dutiable product. During the process of manufacture of the dutiable product, Molasses Sludge waste was generated. The appellant cleared the sludge and paid the Service Tax on transportation of the goods. The appellant availed Cenvat credit on the input service for payment of Service Tax on transportation of Molasses Sludge. The Adjudicating authority disallowed the Cenvat credit of Rs. 1,83,603/- along with interest and imposed penalty, which is upheld by the Commissioner (Appeals). According to Revenue, the waste product is exempted and therefore, they are not entitled to avail the Cenvat credit for payment of Service Tax on GTA.

Appelants Contention-On the other hand, the learned Advocate on behalf of the appellant submits that the issue is covered by the decision of the Tribunal in the case of M/s. Lupin Ltd. v. CCE&ST - 2011-TIOL-954-CESTAT-MUM.= 2013 (31)S.T.R.744 (Tri.-Mum.). It is submitted that the appellant manufactured DNE, which is dutiable final product.

Respondents Contention-The learned Authorised Representative for the Revenue submits that as per Rule 6(1) of Cenvat Credit Rules, 2004, the Cenvat credit is not admissible on the inputs, used for the manufacture of exempted goods.

Reasoning Of Judgement-As per Rule 3 of the Cenvat Credit Rules, 2004, a manufacturer shall be allowed to take credit on inputs received in the factory for manufacture of final product or premises of the provider of output service. In the present case, the appellants availed credit on the inputs and input service for manufacture of dutiable final product and the waste was generated during the process of manufacture of dutiable final product. The Rule 6 of the said Rules would apply, on the inputs which are used in the manufacture of exempted final product. In the present case, the inputs were used not in the manufacture of exempted final products. It is used in the manufacture of dutiable final product. Hence, Rule 6(1) of the said Rules would not apply and there is no reason to deny the Cenvat credit on the input and input service credit used for transportation of the sludge. This view is also supported by the decision of the Tribunal in the case of M/s. Lupin Ltd. (supra). The learned Advocate contended that the demand is barred by limitation. As the matter is decided on merit, there is no need to go into the limitation.In view of the above discussion, the impugned order is set aside. The appeal filed by the appellant is allowed.

Decision-Appeal allowed

Comment-The crux of the case is thatRule 6 of Cenvat Credit Rules, 2004 would apply, on the inputs which are used in the manufacture of exempted final product whereas in the present case, the inputs were used in the manufacture of dutiable final product. Hence, Rule 6(1) of the said Rules would not apply and there is no reason to deny the Cenvat credit on the input and input service credit used for transportation of the molasses sludge. The same view was also supported by the remarkable decision in the case of M/s. Lupin Ltd.v. CCE & ST.

Prepared By-Neelam Jain

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PJ/CASE LAW/2016-17/3194

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