2011 (3) TMI 1138 - AT - Central Excise

Cenvat credit denied - manufacturing both exempted final product and dutiable final products and that they failed to maintain separate accounts - Commissioner(Appeals) allowed the credit - Held that - There is no clarity on the basic facts such as the identity of inputs and the stage at which the inputs are introduced in the manufacturing process, which are relevant before reaching any conclusion about the commonness of inputs. Therefore we deem it appropriate that the matter goes back to the original authority for fresh consideration - set aside the order of the Commissioner(Appeals) and the order of original authority and remand the matter to the original authority for fresh consideration.

Summary

Issues: Appeal against Commissioner(Appeals) order regarding excise duty on by-product sulphur, failure to maintain separate accounts, and CENVAT credit disallowance.

1. Appeal against Commissioner(Appeals) Order:
The Department filed an appeal challenging the Commissioner(Appeals) order dated 22.02.2007, which set aside the original authority's decision. The original authority had found that the Respondents were manufacturing both exempted and dutiable final products without maintaining separate accounts as required by the Central Excise Rules and CENVAT Credit Rules. A demand of Rs.2,38,86,707.88 was confirmed along with interest and penalty. The Department contended that the nature of the product, whether a by-product or final product, does not affect the levying of excise duty. The Commissioner(Appeals) allowed the appeal, leading to the Department's current appeal.

2. Lack of Clarity on Inputs and Manufacturing Process:
The Tribunal noted that the original authority's order did not specify the impugned inputs or the stage at which they were introduced in the manufacturing process. This lack of clarity raised questions about the commonness of inputs and the failure to maintain separate accounts. The Commissioner(Appeals) also pointed out these deficiencies and accepted the Respondents' argument that the refinery activities were not an integrated process. Additionally, the Commissioner held that the sulphur recovery plant was a separate entity with a distinct process and that sulphur was a by-product of an intermediate product.

3. Remand for Fresh Consideration:
Given the lack of clarity on crucial facts regarding inputs and manufacturing stages, the Tribunal decided to remand the matter back to the original authority for fresh consideration. The Tribunal set aside both the Commissioner(Appeals) order and the original authority's order, emphasizing the need for a clear understanding of the inputs and manufacturing process before reaching any conclusions about commonness. The original authority was directed to reexamine the case after granting the Respondents a reasonable opportunity to be heard.

In conclusion, the Tribunal allowed the appeal by way of remand, highlighting the importance of establishing clarity on inputs and manufacturing processes in excise duty cases involving the classification of products and the maintenance of separate accounts.