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2012 (9) TMI 309 - AT - Central ExciseCenvat Credit on inputs used in manufacture of exempted final products - Low Sulphur Heavy Stock (LSHC) used as fuel in the generation of steam which was in turn used in the manufacture of exempted fertilizer - the assessee contested that exclusion of fuel-inputs from the purview of sub-rule (2) of Rule 6 would mean that such inputs are also automatically excluded from sub-rule (1) - Held that - Sub-rule (1) is plenary and it restates a principle, namely, that CENVAT credit for duty paid on inputs used in the manufacture of exempted final products is not allowable, thus sub-rule (1) is plenary, hence, it cannot be said that because sub-rule (2) is inapplicable to fuel-input(s), CENVAT credit is automatically available to such inputs even if they are used in the manufacture of exempted goods. The cumulative reading of sub-rules (1) and (2) makes it abundantly clear that the circumstances specified in sub-rule (2), which inter alia requires separate accounting of inputs, are not applicable to the fuel-input(s). However, the said sub-rule (2) nowhere says that the legal effect of sub-rule (1) will stand terminated in respect of fuel-inputs which do not fall in sub-rule (2). Therefore, sub-rule (1) shall apply in respect of goods used as fuel and on such application, the credit will not be permissible on such quantity of fuel which is used in the manufacture of exempted goods. In view of the fact that fuel was used for generation of steam or electricity and these are not final products but intermediate products, the restrictions are not applicable and they are covered by the phrase for any other purpose. The Hon ble Supreme Court has taken the view that if the fuel is used for the manufacture of non dutiable final product, credit is not eligible. It may be seen that the Tribunal had not considered the provisions of Rule 6 and had also not considered the fact that Rule 6(1) is the plenary rule. The decision of the Apex Court in the GNFC 2009 (8) TMI 15 - SUPREME COURT was rendered on 17.08.09 whereas the decision in the assessee s own case was rendered on 16.07.08. Not only the decision of the Apex Court in GNFC was subsequent to the decision in the assessee s own case but also in the case of GNFC, Apex Court had considered the relevant provisions of the law, applied them to the facts which are similar to the case of GSFC and came to the conclusion and therefore the ratio decidendi in that case would be definitely applicable to the present case.
Issues Involved:
1. Eligibility for CENVAT credit on Low Sulphur Heavy Stock (LSHS) used as fuel in the generation of steam for the manufacture of exempted fertilizer. 2. Applicability of the principle of res judicata. 3. Interpretation of Rule 6 of the CENVAT Credit Rules and its impact on the eligibility of CENVAT credit. 4. Binding nature of Supreme Court decisions on lower authorities. Detailed Analysis: 1. Eligibility for CENVAT Credit on LSHS: The primary issue in this case was whether the appellant was eligible for CENVAT credit on LSHS used as fuel in generating steam, which was subsequently used in the manufacture of exempted fertilizer. The appellant had previously received a favorable decision from the Tribunal, upheld by the Supreme Court, for the period from September 1997 to January 1998. However, the Commissioner, in the impugned order, denied the credit for subsequent periods, citing a later Supreme Court decision in the case of Gujarat Narmada Fertilisers Ltd. (GNFC), which held that LSHS used in the manufacture of steam for exempted products was not eligible for CENVAT credit under Rule 6 of the CENVAT Credit Rules. 2. Principle of Res Judicata: The appellant argued that the principle of res judicata should apply, meaning the earlier Supreme Court decision in their favor should bind the current proceedings. They contended that the Commissioner could not ignore the decision in their own case in preference for another party's case. The appellant relied on several decisions, including J.K. Charitable Trust, to argue that a decision in their own case should be binding. 3. Interpretation of Rule 6 of the CENVAT Credit Rules: The Tribunal examined whether the definition of "input" under Rule 57B(iv) and Rule 57AB, which allowed credit for inputs used as fuel or for generating steam or electricity, would prevail over Rule 57C, which disallowed credit for inputs used in the manufacture of exempted final products. The Tribunal noted that the Supreme Court in the GNFC case had clarified that Rule 6(1) was plenary and applied to all inputs, including fuel, thereby disallowing credit for fuel used in the manufacture of exempted goods. 4. Binding Nature of Supreme Court Decisions: The Tribunal considered the binding nature of Supreme Court decisions and the principle of judicial discipline. The Tribunal noted that the Supreme Court's decision in the GNFC case, which was subsequent to the decision in the appellant's case, had examined the relevant provisions of law in detail and provided a clear ratio decidendi. Therefore, the Tribunal held that the decision in the GNFC case should prevail over the earlier decision in the appellant's case, as it laid down the law more comprehensively. Conclusion: The Tribunal rejected the appellant's appeal, holding that the decision in the GNFC case was binding and applicable to the present case. The Tribunal found no merit in the appellant's arguments regarding res judicata and the interpretation of the CENVAT Credit Rules. The Tribunal concluded that the appellant was not eligible for CENVAT credit on LSHS used as fuel in the generation of steam for the manufacture of exempted fertilizer. The appeal was dismissed.
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