2007 (11) TMI 623 - AT - Central Excise

Clearance of Sulphuric Acid without payment of duty - reversal of CENVAT credit - Rule 6 of Cenvat Credit Rules 2002 - Held that - sulphuric acid was cleared without payment of duty under Central Excise (Removal of the Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules 2001. It is noted that chapter X procedure under the erstwhile Central Excise Rules 1944 was withdrawn in 2001 and the Rules 2001 was introduced - the case of Aureola Chemicals Ltd. vs. CCE Indore 2004 (1) TMI 244 - CESTAT NEW DELHI applicable in the present case where it was held that rule 57CC of the said erstwhile Rules is not applicable in respect of clearance under chapter X procedure which is neither exempted goods nor chargeable to Nil rate of duty - demand set aside. CENVAT credit - whether cenvat credit reversible in respect of common inputs used in generation of steam which was further used for generation of electricity sold outside the factory? - Held that - this issue is required to be examined by the Commissioner (Appeals) afresh - matter on remand. Appeal allowed in part and part matter on remand.

Summary

Issues Involved:
1. Clearance of Sulfuric Acid without payment of duty under Central Excise Rules.
2. Reversal of cenvat credit on common inputs used in the generation of steam for electricity sold outside the factory.

Analysis:

Issue 1: Clearance of Sulfuric Acid without payment of duty under Central Excise Rules:
The appeal involved a situation where the respondent cleared Sulfuric Acid without paying duty by following the prescribed procedure under the Central Excise Rules. The Revenue demanded payment of 8% of the amount under Rule 6 of Cenvat Credit Rules, 2002. The Adjudicating authority confirmed the demand, but the Commissioner (Appeals) allowed the respondent's appeal. The authorized representative for the Revenue argued that following the Commissioner (Appeals) findings would lead to discrimination under Rule 6 of Cenvat Credit Rules, 2002. He cited a Supreme Court decision to support his argument. However, the Tribunal found that the Commissioner (Appeals) decision was in line with a previous Tribunal ruling in the case of Aureola Chemicals Ltd. vs. CCE, Indore. The Tribunal highlighted that goods cleared under a specific procedure were neither exempted nor chargeable to Nil duty, thus upholding the Commissioner (Appeals) order in favor of the respondent.

Issue 2: Reversal of cenvat credit on common inputs used in the generation of steam for electricity sold outside the factory:
The second issue revolved around the reversal of cenvat credit on common inputs used to generate steam, which was then utilized for producing electricity sold outside the factory. The Commissioner (Appeals) had passed an order based on a Tribunal decision in the case of Rama Industries Limited vs. CCE, Chandigarh. However, the larger bench of the Tribunal in the case of Rallies India Limited vs. CCE, Salem overruled the decision in the Rama Industries case. Upon review, the Tribunal agreed with the authorized representative for the Revenue that the reversal of cenvat credit on steam was not justified. Given the change in legal position due to the overruling of the previous decision, the Tribunal set aside the Commissioner (Appeals) order on this issue and remanded the matter back for fresh consideration in accordance with the updated legal stance.

In conclusion, the Tribunal upheld the Commissioner (Appeals) decision regarding the clearance of Sulfuric Acid without payment of duty and remanded the issue of cenvat credit reversal on common inputs back to the Commissioner (Appeals) for reconsideration in light of the revised legal position.