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2017 (10) TMI 16 - AT - Central ExciseCENVAT credit - reversal of credit - change in classification of product - penalty - Held that - the penalty imposed seems to be unwarranted as the issue was regarding the classification due to change in the Tariff. It is a settled law that the penalty need not be imposed due to the dispute on classification - penalty set aside. Reversal of CENVAT credit - clearance of exempt intermediary product/by product - Neem Oil, De-oiled cake, Husk and Spent Meal - Held that - When it is admitted and accepted that these products Neem Oil, De-oiled cake, Husk and Spent Meal arise during the course of manufacturing of fungicides and insecticides, the said products cannot be held as an exempted final product manufactured by the appellant - the law is settled by the apex court in the case of DSCL Sugar Ltd. 2015 (10) TMI 566 - SUPREME COURT , where it was categorically settled the law that waste products arising during the course of manufacture of final products cannot be covered under the definition of manufacture as per Section 2(f) of Central Excise Act, 1944 thereby laying to rest the Revenue s contention that any product that emerges during the course of manufacturing and having commercial and technological meaning of finished goods is not a manufactured product. Appeal allowed - decided in favor of appellant.
Issues:
1. Demand of Central Excise duty and reversal of CENVAT credit. 2. Penalty imposition due to classification dispute. 3. Reversal of CENVAT credit on intermediary/finished products/by-products. Detailed Analysis: 1. Demand of Central Excise Duty and Reversal of CENVAT Credit: The appellant was issued a show-cause notice demanding Central Excise duty of ?53,33,308/- on the point of reversal of CENVAT credit for clearances of Neem Oil, De-oiled Cake, Husk, and Spent Meal. Additionally, there was a demand of ?19,80,149/- due to a change in classification for the period April 2009 to September 2013. The adjudicating authority confirmed the demand for Neem extracts for the period April 2009 to March 2010, along with interest and equivalent penalty, but dropped the balance demand on Neem extracts. The proceedings in respect of the demand of ?31,99,775/- for the reversal of CENVAT credit on marigold oleoresin job work basis were also dropped. The authority confirmed the demands of ?21,33,533/- for the reversal of CENVAT credit on common inputs used in manufacturing both dutiable and exempted products, along with interest and equivalent penalty. 2. Penalty Imposition Due to Classification Dispute: The appellant contested the penalty imposed on the confirmed demand of ?1,65,264/-, arguing that the non-payment of duty was due to a classification dispute, and it is a settled law that penalty should not be levied in such cases. The tribunal found the penalty to be unwarranted as the issue was related to the classification change in the Tariff and set aside the penalty imposed by the adjudicating authority. 3. Reversal of CENVAT Credit on Intermediary/Finished Products/By-Products: The appellant argued that Neem Oil, De-oiled Cake, and Husk, which arise during the extraction of Neem Extracts, are inevitable technological by-products and should not be considered as finished goods or by-products necessitating reversal of CENVAT credit. The adjudicating authority held these products as manufactured products under the definition of Excisable Goods as per Section 2(f) of the Central Excise Act, 1944, read with Rule 2(d) of CENVAT Credit Rules. The tribunal, however, found that the adjudicating authority's confirmation of demand was without basis. It was accepted that these products arise during the manufacturing of fungicides and insecticides and cannot be held as exempted final products. The tribunal relied on the apex court's judgment in Hindustan Zinc Ltd., which clarified that waste products arising during manufacturing do not necessitate reversal of CENVAT credit. The tribunal also referenced the High Court of Madras in EID Parry (I) Ltd. and the apex court in DSCL Sugar Ltd., which supported the view that waste products arising during manufacturing cannot be considered manufactured products. Consequently, the tribunal found the impugned order unsustainable and set it aside. Conclusion: The appeal was allowed to the extent indicated, setting aside the penalty imposed due to classification dispute and the demand for reversal of CENVAT credit on intermediary/finished products/by-products. The tribunal upheld the discharge of the demand of ?1,65,264/- along with interest but set aside the penalty imposed on this point. The order was pronounced in open court on 28.09.2017.
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