2017 (12) TMI 1302 - AT - Central Excise

CENVAT credit - removal of inputs as such - Bitumen - price variation clause - whether the appellant has removed inputs as such and thus failed to reverse the cenvat credit taken as required under the scheme of the Act & under Rules? - Held that - If the allegation in the SCN are taken on their face value, the appellant will never incur a profit, rather always put to loss on selling their inputs - there is price variation clause, which mentions that the rates of bitumen emulsion are based on the rate of bitumen as on 1st January, 2012 for supplies in bulk (exclusive of Excise Duty and Sales Tax). The price taken for the purpose of working out the price variation will consist of basic price of bitumen only, prevailing on the rate 15 days prior to the date on which the said lot was offered for inspection, as indicated in the Inspection Note. The basic rates quoted in the quotation list are subject to the price variation clause. The appellant was removing Bitumen emulsion and not bitumen as such - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the appellant removed inputs as such and failed to reverse the cenvat credit taken?
- Whether the demand raised by the adjudicating authority is time-barred?
- Whether the appellant cleared Bitumen or Bitumen emulsion?
- Whether the appellant's contention of converting petroleum Bitumen to natural Bitumen is valid?
- Whether the appellant's plea regarding clerical error in mentioning Bitumen instead of Bitumen emulsion is acceptable?
- Whether the appellant's selling price of Bitumen emulsion being lower than the purchase price of Bitumen is a valid argument?

Analysis:
1. Issue of failing to reverse cenvat credit: The appellant was accused of not reversing the cenvat credit taken on the removal of Bitumen as such. The show cause notice proposed a demand for excise duty and cenvat credit along with penalties. The adjudicating authority confirmed the disallowance of cenvat credit and imposed penalties. The appellant contended that the demand was time-barred and that they did not remove Bitumen as such but Bitumen emulsion, which was a different product classification.

2. Time-barred demand: The appellant argued that the demand was beyond the prescribed one-year period, making it prima facie time-barred. They also mentioned that they had paid the duty on the differential sale value before the show cause notice was issued. The Commissioner (Appeals) noted the payment made by the appellant and rejected the contention of the demand being time-barred.

3. Classification of Bitumen or Bitumen emulsion: The appellant clarified that they procured petroleum Bitumen but cleared Bitumen emulsion, which fell under a different chapter. The Commissioner observed the classification under CETA and concluded that the appellant was removing Bitumen emulsion, not Bitumen as such.

4. Conversion of petroleum Bitumen to natural Bitumen: The appellant's argument of converting petroleum Bitumen to natural Bitumen was rejected by the Commissioner, stating that it was not possible to reverse the reaction of any compound and change the property from synthetic to natural.

5. Clerical error in mentioning Bitumen: The appellant claimed a clerical mistake in mentioning Bitumen instead of Bitumen emulsion in their invoices. The adjudicating authority rejected this plea, and the Commissioner noted that the appellant's new contention was to establish manufacturing activity and avoid reversal in case of removal as such.

6. Selling price argument: The appellant argued that the selling price of Bitumen emulsion was lower than the purchase price of Bitumen, indicating a profitable business model. They explained the manufacturing process and provided financial statements to support their claim. The Tribunal found merit in the appellant's contentions and allowed the appeal, stating that Bitumen emulsion was being removed, not Bitumen as such.