2014 (8) TMI 84 - AT - Central Excise

Cenvat Credit - Utilization of credit taken on molasses for payment of duty on Sugar - credit of duty paid on molasses was taken for use in the manufacture of ethyl alcohol in the Distillery Division - Held that - From a reading of sub-rule (3), it is abundantly clear that there is no one-to-one correlation required between the input and the output and the duty paid on any input can be utilized for payment of any duty of excise on any final product. The decision of this Tribunal in the various case laws relied upon by the appellant also support this view. Therefore, prima facie, the appellant has made out a case for grant of stay. - stay granted.

Summary

Issues Involved:
1. Objection to the hearing of the appeal and stay petition by the same Division Bench.
2. Utilization of CENVAT credit on molasses for payment of duty on sugar.

Issue-wise Detailed Analysis:

1. Objection to the Hearing by the Same Division Bench:
The appellant raised an objection against the Division Bench comprising of Shri P.R. Chandrasekharan and Shri Anil Choudhary hearing the appeal and stay petition. The basis for this objection was that the same Bench had previously heard a ROM application related to the same matter and had directed the original adjudicating authority for re-determination of demand. The appellant contended that since the Bench had already formed an opinion, it would not be appropriate for them to hear and decide the matter again. However, the Tribunal dismissed this miscellaneous application, stating that various Benches often hear matters multiple times, and their orders are sometimes set aside and remanded back by higher courts. Therefore, the jurisdiction of the Tribunal is not barred merely because the same Bench had heard the matter earlier.

2. Utilization of CENVAT Credit on Molasses for Payment of Duty on Sugar:
The primary issue in the case was whether the appellant could utilize the CENVAT credit accumulated from the duty paid on molasses for the payment of duty on sugar. The appellant, a sugar manufacturer, had a credit balance in their CENVAT Account due to the duty paid on molasses used in their Distillery Division. They utilized this credit for paying duty on sugar during a specific period, which the department objected to, arguing that molasses is not an input for the manufacture of sugar. According to the department, the utilization of credit was not permissible under the CENVAT Credit Rules as they stood at the relevant time.

The appellant argued that there is no requirement for a one-to-one correlation between the input and output under the CENVAT Credit Rules. They cited several Tribunal decisions supporting their stance, including Niphad SSK Ltd., Shri Datta Shetkeri SSK Ltd., Kumbhi Kasari SSK Ltd., and Navabharat Ferro Alloys. The appellant emphasized that the lower authorities should have followed these precedents, as established by the Hon'ble Apex Court in the case of Birla Corporation.

On the other hand, the Revenue contended that under the CENVAT Credit Rules, 2001, the definition of "input" required the goods to be used in or in relation to the manufacture of final products. Since molasses is not an input for sugar, the duty paid on molasses could not be availed as credit for the payment of duty on sugar.

The Tribunal carefully considered the submissions and noted that Rule 3 of the CENVAT Credit Rules allowed for the utilization of credit for payment of any duty of excise on any final products. The Tribunal concluded that there is no requirement for a one-to-one correlation between the input and the output, and the duty paid on any input can be utilized for payment of any duty of excise on any final product. This interpretation was supported by various case laws cited by the appellant. Consequently, the Tribunal granted an unconditional waiver from pre-deposit of the dues adjudged against the appellant and stayed the recovery thereof during the pendency of the appeal.

Conclusion:
The Tribunal dismissed the miscellaneous application challenging the jurisdiction of the Division Bench and ruled in favor of the appellant regarding the utilization of CENVAT credit on molasses for payment of duty on sugar. The Tribunal granted an unconditional waiver from pre-deposit and stayed the recovery of the adjudged dues during the appeal's pendency.