2018 (11) TMI 296 - AT - Central Excise

Benefit of N/N. 67/95 denied - captive consumption - Pig iron captively for manufacture of other machinery items/parts, which were further used for repair and maintenance of machinery installed in the factory premises and assessee availed benefit of N/N. 65/95-CE dated March 16, 1995 - benefit of N/N. 67/95 denied on the ground of availment of exemption from duty in terms of N/N. 65/95 dated March 16, 1995. Held that - The Notification No.217/86-CE as well as successor Notification 67/95 grants exemption to goods, which are captively consumed within the factory for manufacture of further goods, but the provisions of the Notifications excludes the benefit to inputs used in or in relation to the manufacture of final products, which are exempted from whole of duty of excise leviable thereon or are chargeable to nil rate of duty. The Tribunal in the case of Rastriva Ispat Nigam Limited 2002 (8) TMI 188 - CEGAT, BANGALORE , has held that in absence of any definition, the products consumed within the factory would continue to be intermediate products, even when the intermediate products are further captively consumed to manufacture other goods. Ultimately, when certain goods are cleared from the factory, only those goods are to be considered as final products, which are liable to payment of duty - The Tribunal held that so long as duty is paid on the final product, the mere fact that the duty was not paid on the intermediate products, would not disentitle the manufacture from the benefit of N/N 217/86-CE as well as successor Notification 67/95-CE. Revenue neutrality - Held that - Even if the duty is held as payable on the pig iron used in the manufacture of intermediate products as per show-cause notices, the same will be available as credit to the respondents under the Cenvat Credit/Modvat Credit Rules. Consequently, this will lead to a revenue neutral situation. In such a scenario, there is no justification to demand of duty. Appeal dismissed - decided against Revenue.

Summary

Issues involved:
- Interpretation of Notification No. 67/95 and Notification No. 65/95 for availing exemption benefits.
- Correctness of duty demand on pig iron and steel scraps.
- Validity of exemption under Notification No. 202/88-CE for captively consumed goods.
- Applicability of exemption to intermediate products used in repair and maintenance.
- Admissibility of duty demand on pig iron consumed in the manufacture of specific goods.
- Consideration of case laws and circulars for interpreting exemption notifications.

Issue 1: Interpretation of Notification No. 67/95 and Notification No. 65/95 for availing exemption benefits:
The appeals revolve around whether the respondent correctly availed exemption under Notification No. 67/95 and Notification No. 65/95. The Commissioner had dropped duty demands on pig iron and steel scraps, citing exemption provisions. The Revenue contended that the duty demands were valid, challenging the Commissioner's decision.

Issue 2: Correctness of duty demand on pig iron and steel scraps:
The Revenue alleged that the respondent, an integrated steel plant, wrongly availed duty exemption under Notification No. 67/95 on pig iron and steel scraps. The demand was based on the Proviso to the notification, which restricts exemption for inputs used in manufacturing final products exempted from duty. The dispute centered on the proper application of the exemption provisions.

Issue 3: Validity of exemption under Notification No. 202/88-CE for captively consumed goods:
Regarding the captively consumed pig iron in the manufacture of specific goods exempted under Notification No. 202/88-CE, the Revenue claimed duty liability. The show cause notices demanded duty on pig iron used in producing exempted items like fluted moulds, bottom plates, etc. The contention was whether the exemption was correctly availed by the respondent.

Issue 4: Applicability of exemption to intermediate products used in repair and maintenance:
The intermediate products, consumed for repair and maintenance of machinery within the factory, were a subject of dispute. The Commissioner's order dropped duty demands on these products under Notification No. 65/95. The question arose whether such consumption qualified for exemption under the relevant notifications.

Issue 5: Admissibility of duty demand on pig iron consumed in the manufacture of specific goods:
The Revenue argued that duty should be levied on pig iron consumed in producing goods exempted from duty under specific notifications. The show cause notices sought duty payment on pig iron used in manufacturing fluted moulds, bottom plates, etc. The issue was whether such consumption warranted duty imposition.

Issue 6: Consideration of case laws and circulars for interpreting exemption notifications:
The respondent relied on legal precedents like Escorts Ltd. and Rastriva Ispat Nigam Limited cases, along with a CBEC circular, to support their position. These references highlighted the interpretation of exemption notifications and captive consumption benefits. The Tribunal analyzed these precedents to determine the correctness of the Commissioner's decision.

This detailed analysis covers the various issues raised in the legal judgment, providing a comprehensive overview of the interpretation of exemption notifications, duty demands, and relevant case laws.