2010 (6) TMI 460 - AT - Central Excise

CENVAT credit - Utilize the credit on molasses for payment of duty on sugar - The proviso to Rule 57F(12) enabled the assessee to utilize the credit of duty paid on molasses towards payment of duty on sugar - The existence of the sugar and distillery divisions as two distinct units within the same factory would not ipso facto disentitle the assessee - If there is any conflict between the Tribunal s decision and the Board s clarification the former will prevail - Hence the assessee s appeal succeeds and the Revenue s fails

Summary

Issues:
1. Utilization of MODVAT credit on molasses for payment of duty on sugar between different divisions within the same factory.
2. Interpretation of Rule 57F(12) and Rule 57AB regarding the utilization of credit on inputs for payment of duty on final products.
3. Application of Circular No. 615/6/2002-C.X. in the case of a manufacturer with distinct Sugar and Distillery Divisions.

Analysis:
1. The case involved the utilization of MODVAT credit on molasses accumulated in the Distillery Division for payment of duty on sugar cleared from the Sugar Division within the same factory. The Revenue contended that molasses was not an input for the Sugar Division, thus disallowing the credit transfer.

2. The assessee argued that Rule 57F(12) allowed credit of duty paid on inputs to be used for duty payment on final products, provided the inputs were intended for use in the final product's manufacture. The proviso to this rule permitted such credit utilization for any final product on or after March 1, 1997, supporting the assessee's claim for utilizing the credit on molasses for sugar duty payment.

3. The Tribunal considered the legal provisions and past decisions, including Circular No. 615/6/2002-C.X., which clarified the credit utilization scenario for manufacturers with Sugar and Distillery Units. The Tribunal noted that the proviso to Rule 57F(12) relaxed conditions for credit utilization, allowing the manufacturer to use the credit on molasses for sugar duty payment, even with distinct divisions within the same factory.

4. Citing precedents like Navabharat Ferro Alloys case, where a similar credit utilization issue arose between sugar and distillery divisions, the Tribunal emphasized that the manufacturer's entitlement to credit utilization is upheld if the legal provisions permit, despite distinct divisions within the factory. The Tribunal highlighted that its decision prevails over conflicting Board clarifications.

5. Ultimately, the Tribunal ruled in favor of the assessee, allowing the utilization of MODVAT credit on molasses for duty payment on sugar, based on the provisions of Rule 57F(12) and Rule 57AB. The Revenue's appeal was dismissed, and the Cross Objection by the assessee was disposed of accordingly.

This detailed analysis of the judgment highlights the legal intricacies involved in the case, focusing on the interpretation of relevant rules and past decisions to determine the admissibility of credit utilization between different divisions within the same factory.