2017 (7) TMI 166 - AT - Central Excise

CENVAT credit - inputs - Sulphur Absorption Catalyst used for manufacture of non-dutiable goods - Rule 6 (1) of the CCR - separate account for the receipt, consumption and inventory of inputs meant for use in the manufacture of exempted goods not maintained - whether Sulphur which emerges as a result of the Desulphurisation of HSD is an exempted final product for which input namely Sulphur Absorption Catalyst has been used in its manufacture? - Held that - Sulphur is a commercial product and sold in the market has not been rebutted by the appellant - Sulphur produced in the process of Desulphurisation is an excisable goods and is not only marketable but actually sold commercially by the appellant. Since it is chargeable to nil rate of duty in the Tariff, it is in the category of exempted goods - demand with interest upheld. Extended period of limitation - penalty - Held that - there has been no intimation to the Department before the investigations began - there was clear suppression of material facts by appellant for which extended period has been rightly upheld and penalty has been correctly imposed. Appeal dismissed - decided against appellant.

Summary

Issues:
Demand of Cenvat Credit availed under Rule 12 of CCR, 2002 with interest and penalty.

Analysis:
1. The appellant, a petroleum products manufacturer, availed Cenvat Credit on inputs used for the recovery of Sulphur, a non-dutiable product. The appellant failed to maintain separate accounts for inputs used in exempted goods, resulting in demand, penalties, and interest. The appeal challenged the confirmation of demand, interest, and penalty.

2. The appellant argued that the Sulphur Absorption Catalyst was used in the manufacture of final products and cited relevant case laws. They contended that Rule 6 did not apply to byproducts/waste. The appellant claimed the demand was time-barred, citing previous show cause notices. The AR reiterated the findings of the Commissioner, emphasizing Sulphur as a final product intentionally manufactured for commercial purposes.

3. The Tribunal analyzed whether Sulphur, a product of Desulphurisation, was an exempted final product, as per Cenvat Credit Rules. The Tribunal noted that Sulphur was intentionally produced through an active intervention process by the refinery and declared as a final product. As Sulphur was marketable and sold commercially, the demand with interest was upheld.

4. The Tribunal rejected the appellant's argument for credit based on a previous case, clarifying the distinction between capital goods and inputs. The Tribunal distinguished another case where the final product was not sold commercially. The contention of limitation was dismissed as the show cause notices addressed different issues, and suppression of material facts was found, justifying the extended period and penalty.

5. The Tribunal upheld the Commissioner's order, dismissing the appeal. The judgment highlighted the intentional production and commercial sale of Sulphur, affirming the demand of Cenvat Credit with interest and penalty. The appeal was dismissed, and the order pronounced on 03.07.2017.