2016 (10) TMI 820 - AT - Central Excise

Input credit - LSHF-HSD - whether the appellants are eligible to avail CENVAT Credit on Low Sulphur High Flash - High Speed Diesel Oil keeping on view that LSHF HSD is nothing but HSD with a different flash point and specific content of sulphur and hence the same is nothing but HSD, which is excluded from the definition of input ? - classification of goods - interpretation of law - Held that - the definition of input in 2 (k) of CENVAT Credit Rules, 2004 excludes interalia, High Speed Diesel Oil (HSD) from the meaning of input. It is further seen that in the Central Excise Tariff Act, 1985 the classification of HSD is 2710 19 30. There is no separate sub-classification for LSHF-HSD. This implies that HSD and all its variations will necessarily be classified under the said heading only. The input invoices of LSHF-HSD from Indian Oil Corporation Ltd., also clearly classify the said items under CTH classification 2710 19 30 only. The use of the word High Speed Diesel in the definition of input will therefore necessarily have to harmonize with the tariff entry and heading of the same item in the said Central Excise Tariff Act. This being so, HSD and all its variations including LSHF-HSD, will be in the same footing, for the purposes of Rule 2(k) of CENVAT Credit Rules 2004. Consequently, HSD and all its variations including LSHF-HSD, will be excluded from the ambit of input defined in the said Rule 2(k). Extended period of limitation - It is not the case that the appellant had not submitted statutory returns disclosing the necessary details. In fact, on going through copies of RT-12 submitted by the appellant we find that product LSHF-HSD or LS/HF HSD, has been mentioned in the input credit statements. However, as indicated in the SCN, and as conceded by the Ld. Counsel, the appellant had described the product as ST 6733 in the input credit statements for the latter part of the impugned period. This being so, we are of the considered opinion that for the periods during which the appellant had indicated the description of the product/input as LSHF-HSD or LS/HF HSD, the department cannot allege suppression and hence any demand of duty for the said irregular availment of credit will be barred by limitation. Whereas, during the period in which the appellant had merely described the product/input as ST 6733, in our view would amount to suppression/and mis-declaration of vital facts and the department is well within its rights to demand duty for said period. Credit not allowed - however, the demand for the period during which appellant has declared the input goods as LSHF-HSD or LS/HF HSD is not sustainable. The demand for the period during which the appellant has declared the input goods as ST 6733 is sustained - matter remanded to adjudicating authority for the limited purpose of calculating the demand sustained for the said period along with interest and consequential revision of penalty as applicable - decided in favor of Revenue.

Summary

Issues involved:
Whether the appellant is eligible for input credit on LSHF-HSD.

Analysis:
The Appellate Tribunal CESTAT Hyderabad addressed the issue of eligibility for CENVAT Credit on Low Sulphur High Flash - High Speed Diesel Oil (LSHF-HSD). The appellant, engaged in manufacturing lubricants, availed CENVAT Credit on LSHF-HSD, leading to a Show Cause Notice alleging irregular credit availed during a specific period. The department contended that HSD, including LSHF-HSD, is excluded from the definition of "input" under CENVAT Credit Rules, 2004. The Original authority confirmed the proposals in the Show Cause Notice, prompting the appeals.

The appellant argued that LSHF-HSD is a distinct product different from HSD, supported by various technical submissions and documents. They emphasized that LSHF-HSD is used in manufacturing lubricants and should not be considered the same as HSD. The appellant also challenged the department's classification without conducting necessary tests, citing precedents for the requirement of laboratory tests in classification disputes.

In analyzing the issue, the Tribunal noted that the definition of "input" excludes HSD and its variations, including LSHF-HSD. The classification of HSD under the Central Excise Tariff Act and invoices from the supplier supported this exclusion. Therefore, the Tribunal held that input credit cannot be availed on LSHF-HSD, aligning with the authorities' decisions. The Tribunal differentiated between periods where the appellant correctly described the input as LSHF-HSD and where it was misdeclared as ST 6733, ruling that demand for the latter period is sustainable due to suppression of facts.

While the decision favored the revenue on the merits of the issue, the Tribunal found the demand for the period with correct input description as LSHF-HSD not sustainable. The matter was remanded for recalculating the demand for the misdeclared period. Ultimately, the appeal was partly allowed based on these findings, with the judgment pronounced on 26/08/2016 in open court.