2005 (7) TMI 603 - AT - Central Excise

Summary

Issues:
1. Denial of credit for duty paid on 'C-9 solvent' used as fuel.
2. Interpretation of Cenvat Credit Rules, 2001 regarding eligibility of inputs.
3. Discrepancy between 'C-9 solvent' and High Speed Diesel Oil (HSD).
4. Consideration of technical evidence in determining product substitution.
5. Application of principles for varying assessment at supplier's end before taking action at receiver's end.

Analysis:

1. The case involved the denial of credit for duty paid on 'C-9 solvent' used as fuel in the manufacture of final products. The Appellants sought to avail this credit, but it was contested through a Show Cause Notice (SCN) alleging that 'C-9 solvent' was a substitute for High Speed Diesel Oil (HSD), an ineligible input under the Cenvat Credit Rules, 2001.

2. The Commissioner's decision was based on Rule 57A of the Central Excise Rules, 1944, and Notification no. 5/94 Central Excise (N.T.) dated 1-3-94. The Commissioner concluded that since 'C-9 solvent' and HSD fell under the same chapter sub-heading 27.10 of the Central Excise Tariff Act, 1985, and were used interchangeably by the assessee, the credit availed on 'C-9 solvent' was not permissible.

3. The Appellants challenged this decision citing technical evidence from the Additional Commissioner Raigad, Chemical Examiner, Dr. Babasaheb Ambedkar Technological University, and IIT-Mumbai. These reports indicated that 'C-9 solvent' was not a substitute for HSD as they were distinct products. The Appellants argued that the Commissioner erred in ignoring this technical evidence and that the notification excluded only HSD under heading 2710, not other entities under the same heading.

4. It was emphasized that the duty paid should be accepted as shown on the documents, and any alterations in description or classification should first be addressed at the supplier's end before affecting the receiver. The Appellants contended that the demand for denial of credit and penalty was unwarranted based on these principles.

5. Ultimately, the appeal was allowed, setting aside the Commissioner's order, as the technical evidence supported the distinction between 'C-9 solvent' and HSD, and the correct procedure for varying assessments at the supplier's end was not followed before imposing penalties on the receiver.