CENVAT - Rule 3(3) of CCR, 2004 - Duty paid on any input can be utilized for payment of any duty of excise on any final product - no one-to-one correlation required - availment of duty paid on Molasses for payment of duty on Sugar not barred: CESTAT
By TIOL News Service
MUMBAI, JULY 31, 2014: THE appellant manufactures sugar. During the process of manufacture, molasses arise and excise duty liability is discharged on molasses. The appellant has two Divisions in their factory called Sugar Division and Distillery Division.
The molasses manufactured in the sugar Division are cleared to the Distillery Division on payment of appropriate duty and the molasses is further used in the manufacture of ethyl alcohol in the Distillery Division. Ethyl alcohol is a non-excisable item and from the ethyl alcohol, rectified spirit is manufactured, which is again an excisable and dutiable item. The excise duty paid on molasses is taken as credit for payment of duty on rectified spirit and there is no dispute in this regard.
The appellant had a credit balance of Rs.1,61,81,883.02 on 01.09.2001 in their CENVAT Account of Distillery Division on account of the duty paid on molasses and credit taken thereon. An amount of Rs.77,59,089/- was utilized from the said credit account for payment of duty on sugar during the period September to December 2001.
The department objected to the utilization of credit and duty paid on molasses for payment of duty on sugar on the ground that the molasses is not an input for manufacture of sugar and, therefore, utilization of credit on molasses is not permissible under the CENVAT credit Rules as they stood at the relevant time and accordingly, confirmed the duty demand.
As the lower appellate authority upheld the demand, the appellant is before the CESTAT.
The appellant submitted that there is no requirement of one to one co-relation between the input and output under the CCR, 2004 and, therefore, the demand is not proper and legal. They also placed reliance on the decision in Niphad SSK Ltd. 2010-TIOL-1181-CESTAT-MUM which supported their stand.
The Revenue representative stuck to the allegations and submitted that the appellant be put to terms.
The Bench, after hearing the submissions, extracted in its entirety rule 3 of CCR, 2004 and observed –
++ Though sub-rule (2) of Rule 3 prescribes that the manufacturer shall be allowed to take CENVAT Credit of the duty paid on any inputs or capital goods received by the manufacturer for use in or in relation to the manufacture of final products, the said Rule does not deal with utilization of credit.
++ Utilization of credit is dealt within sub-rule (3) and the said sub-rule provides that CENVAT Credit may be utilized for payment of any duty of excise on any final products or for payment of duty on inputs or capital goods, if such inputs are removed as such or after being partially processed, or such capital goods are removed as such.
++ From a reading of sub-rule (3), it is abundantly clear that there is no one-to-one correlation required between the input and the output and the duty paid on any input can be utilized for payment of any duty of excise on any final product. The decision of this Tribunal in the various case laws relied upon by the appellant also support this view.
Holding that the appellant has made out a prima facie case in favour, the Bench granted unconditional waiver from pre-deposit and stayed the recovery.
In Academic Interest : Incidentally, there was a small episode which preceded this order. Inasmuch as an objection was raised in the miscellaneous application that since the present Bench had heard the ROM application earlier and had formed an opinion in the matter, it shall not be appropriate for the same Bench to hear and decide the matter again. To this submission, the Bench held -
“…we do not find any merit in the said application. The various Benches of the Tribunal hear matters on a number of occasions and the order passed by the Tribunal are taken up by way of appeal before the Hon'ble High Court. Sometimes the Tribunal's orders are set aside and the matters are remanded back and the very same Bench hears the matter on remand. Therefore, no objection can be taken to the Tribunal's hearing the matter once again and the jurisdiction of the Tribunal is not barred merely because they had heard the matter earlier. Thus, the miscellaneous application lacks merit and we dismiss the same.”
(See 2014-TIOL-1378-CESTAT-MUM)
