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2013 (11) TMI 880 - AT - Central ExciseValuation of Niacin - Captive consumption - job work - manufacture niacin and such niacin captively consumed in the manufacture of niacin feed premix - Rule 8 of the Central Excise Valuation (Determination of price of Excisable Goods) Rules 2000 Entitlement for Exemption under Notification No.10/96 Eligibility for Cenvat credit Held that - Niacin feed premix is manufactured by the appellant was not animal feed for which it is not entitled to the duty exemption on niacin - animal feed premix was branded as Proolay N95 which is distinct goods without that being an animal feed - Appellant failed to prove that it manufactured animal feed in essence and substance what that is commonly understood in the market - Niacin feed premix and animal feed are two distinct goods as may be appreciated from their nature and class as is revealed from Chapter 39 of Central Excise Tariff Act, 1985 because chapter 23 has recognised preparation of a kind used in animal feeding without that being animal feed it does not say animal feed supplement is same as animal feed. Following CCE, Guntur vs. Surendra Cotton Oils Mills & Fert. Co. 2000 (12) TMI 103 - SUPREME COURT OF INDIA - The appellant only manufactured a mixture of chemicals in its factory which is called as Niacin Feed Premix but did not manufacture animal feed in the same factory using niacin - thus it was not eligible to the duty exemption under the notification - Legislature consciously granted duty exemption to the intermediate product if such product is used in the same factory to manufacture the notified finished goods under Notification No. 10/96-CE - Such exemption being granted at public cost that cannot be liberally construed to grant undue benefit to the appellant Thus the benefit of duty exemption on niacin was rightly rejected. Duty shall be levied on niacin in accordance with law and the goods in question shall be valued in accordance with CAS -4 - No cenvat credit is available on niacin being used in the goods subjected to nil rate of duty - Interest on duty demand would be leviable - No penalty shall be levied on the appellant for the confusion of the legal position Decided against Revenue.
Issues Involved:
1. Excise duty liability on niacin used in the manufacture of niacin feed premix. 2. Entitlement to duty exemption under Notification No. 10/96-CE dated 23/07/1996. 3. Availability of Cenvat credit on duty paid on niacin. 4. Valuation of niacin under Rule 8 of the Central Excise Valuation Rules, 2000. 5. Imposition of penalties and interest. Issue-wise Detailed Analysis: 1. Excise Duty Liability on Niacin: The primary issue was whether niacin, used in the manufacture of niacin feed premix, was liable to excise duty. The appellant argued that niacin feed premix was animal feed and thus exempt from duty under Notification No. 10/96-CE. However, the Revenue contended that niacin feed premix was not animal feed but an ingredient for it, thus not qualifying for the exemption. 2. Entitlement to Duty Exemption: The appellant claimed duty exemption on niacin under Notification No. 10/96-CE, arguing that niacin feed premix is animal feed. The Revenue refuted this, highlighting that the premix was marketed under the brand name 'Brolay N95' and was not considered animal feed. The adjudicating authority supported this view, citing the Supreme Court's decision in *Surendra Cotton Oil Mills* which distinguished between ingredients and the final product. The Tribunal upheld this interpretation, stating that niacin feed premix did not meet the exemption criteria as it was not consumed within the factory to manufacture animal feed. 3. Availability of Cenvat Credit: The appellant sought Cenvat credit on the duty paid on niacin. The adjudicating authority denied this, stating that niacin was used in the manufacture of goods (niacin feed premix) that were subject to nil duty. The Tribunal agreed, emphasizing that no Cenvat credit is available when the final product is exempt from duty. 4. Valuation of Niacin: The valuation of niacin was contested, with the appellant providing cost data certified by their Chartered Accountant. The adjudicating authority found discrepancies, noting that the appellant based the cost on a different product and did not supply complete job charges details. The Tribunal upheld the need to re-determine the cost of production as per CAS-4, considering all relevant expenses and profit margins. 5. Imposition of Penalties and Interest: Penalties were imposed on the appellant for the duty demands. The appellant argued against the penalties, citing a bona fide belief in their interpretation of the exemption notification. The Tribunal, acknowledging the confusion over legal interpretation, decided to waive the penalties but upheld the interest on the duty demand. Conclusion: The Tribunal concluded that niacin feed premix was not animal feed and thus not eligible for duty exemption under Notification No. 10/96-CE. The appellant was liable to pay excise duty on niacin, with the valuation to be re-determined as per CAS-4. No Cenvat credit was available, and while interest on the duty demand was upheld, penalties were waived due to the legal confusion.
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