2023 (10) TMI 872 - AT - Central Excise

Exemption for Captive Consumption - quantity of coal captively used for further production/manufacture of coal within the mines - denial of benefit of N/N. 67/95 on the ground that the coal is produced and not manufactured - HELD THAT - The grounds of denial of Cenvat credit very strange. The Appellant has opted for payment of Central Excise Duty at the normal tariff rate of 5% with CENVAT credit facility , which is not in dispute. Having allowed the CENVAT credit facility, which is available on inputs used in the manufacture of final product, the Authorities have inprinciple accepted that the activity of coal mining amounts to manufacture . The department has not raised any objection to payment of duty by the Appellant by treating the process as amounting to manufacture . In fact, the very demand in the Notice has been raised by charging duty at the rate of 5%, which is applicable along with Cenvat facility. For the purpose of demanding duty on coal, the Department considers that the Coal mining activity would amount to manufacture . But, the very same coal mining activity has been considered as not amount to manufacture for the purpose of consideration of exemption under Notification No. 67/95. Thus, there is no merit in the impugned order that has denied the benefit of Notification No. 67/95 to the Appellant for the coal consumed captively. The Appellant is eligible for the benefit of Notification No. 67/95 for the coal consumed captively to generate steam to be used as power for the purpose of lifting coal within the mines - the demand confirmed in the impugned order is not sustainable - Appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are the applicability of exemption under Notification No. 67/1995 for coal consumed captively in the mining process and the eligibility of CENVAT credit for the Appellant.

Exemption under Notification No. 67/1995:
The Appellant, a PSU engaged in coal mining, claimed exemption under Notification No. 67/1995 for coal consumed captively within the mines. The Central Excise Department denied the exemption, arguing that the coal must be 'manufactured' to be eligible. However, the Appellant had been paying Central Excise Duty at the normal tariff rate of 5% with CENVAT credit facility, indicating acceptance of coal mining as a manufacturing activity. The Tribunal held that the Appellant was entitled to the exemption as the coal consumed captively was used in the production process, and set aside the demand.

Eligibility of CENVAT credit:
The dispute also involved the eligibility of CENVAT credit for the Appellant. Despite the Department's contention that coal mining did not amount to 'manufacture', the Appellant had been availing CENVAT credit on inputs. The Tribunal noted the inconsistency in the Department's stance, where coal mining was considered manufacturing for duty purposes but not for exemption under Notification No. 67/1995. Consequently, the Tribunal allowed the appeal, stating that the Appellant was eligible for the benefit of the Notification and that the demand was unsustainable, leading to the setting aside of the impugned order without interest or penalty.

Separate Judgment by Judges:
The judgment was delivered by Hon'ble Mr. R. Muralidhar, Member (Judicial), and Hon'ble Mr. K. Anpazhakan, Member (Technical).