2024 (2) TMI 1248 - AT - Central Excise

CENVAT Credit - common inputs/input services used for manufacture of stock transferred exempted goods (lime stone) and dutiable products (Cement/Clinker) - non-maintenance of separate accounts as required under Rule 6(2) of Cenvat Credit Rules, 2004 - liability to pay an amount of 5%/6% of the value of exempted goods (stock transferred lime stone) as under Rule 6(3)(i) of Cenvat Credit Rules, 2004 - Time Limitation - HELD THAT - The lime stone stock transferred being exempted product there is no question of payment of duty or consequent availment of credit by receiving unit. When appellant has used common inputs/input services for stock transferred limestone, appellant has to maintain separate accounts. The appellant not having maintained separate accounts and not having exercised any option under Rule 6(3), the demand raised invoking Rule 6(3)(i) is legal and proper. The decision of the Hon ble Apex Court in the case of JAYPEE REWA CEMENT VERSUS COMMISSIONER OF CENTRAL EXCISE, MP 2001 (8) TMI 1332 - SUPREME COURT is referred by Ld. Consultant to argue that lime stone is only an intermediate product and cannot be considered as a final product. The issue that was considered in the said case was whether Modvat credit is eligible on explosives used for extraction of limestone which is the raw material used in manufacture of cement. The Hon ble Court was considering the applicability of Rule 57A of erstwhile Central Excise Rules, 1944. The assesse therein contended that explosives used in the mining operation must be regarded as inputs. The Tribunal came to the conclusion that as the inputs (explosives) had not been brought into the factory and had been used in the mines outside the factory are not eligible for credit. The Hon ble Apex Court held that even in respect of inputs used in the manufacture of intermediate product, which product is then used for manufacture of a final product (Cement) the credit is eligible. The issue in the case on hand is not on the eligibility of credit on explosives, and not applicable. In the case of VIKRAM CEMENT VERSUS COMMISSIONER OF CENTRAL EXCISE, INDORE 2006 (1) TMI 130 - SUPREME COURT the question that was considered was again the eligibility of credit on explosives used in captive mines. The Hon ble Apex Court held that the credit would be eligible and that the decision in the case of M/s.Jaypee Rewa Cement would apply. It was also held that CENVAT Rules in effect substituted the Modvat Rules. The issue on hand is not eligibility of credit on explosives used in captive mines, and therefore not applicable. Time Limitation - Penalty - HELD THAT - The appellant had periodically filed returns and disclosed the credit availed by them. Further, the demand has been raised on the basis of the accounts maintained by the appellant. The appellant has maintained proper delivery challans and documents for the amount of lime stone stock transferred. There is no positive act of suppression established by the department. Further, the department for the period 1/2017 to 6/2017 has set aside the demand interpreting the issue in favour of appellant - there are no grounds for invoking the extended period. The issue on limitation is answered in favour of appellant and against the Revenue - Being stock transfer of limestone to appellant s own units, and also of interpretational nature, the penalties are to be set aside entirely. The appellant is liable to pay duty along with interest for the normal period. The impugned order is modified to the extent of upholding the demand and interest for the normal period only. The penalties for normal period is set aside - The appeal is partly allowed.

Summary

Issues Involved:
1. Whether the limestone stock transferred to other plants is an exempted final product.
2. Whether the appellant is required to maintain separate accounts for common inputs/input services used for exempted and dutiable products.
3. Applicability of Rule 6(3) of the Cenvat Credit Rules, 2004.
4. Limitation and penalties.

Summary:

Issue 1: Exempted Final Product
The appellant argued that limestone is a raw material for cement and not a final product. The department contended that limestone, being chargeable to 'Nil' rate of duty, is an exempted final product as per Rule 2(d) of the Cenvat Credit Rules. The Tribunal held that limestone stock transferred to other units is an exempted final product.

Issue 2: Maintenance of Separate Accounts
The appellant did not maintain separate accounts for common inputs/input services used for dutiable and exempted products. The Tribunal noted that under Rule 6(2) of the Cenvat Credit Rules, the manufacturer must maintain separate accounts for inputs/input services used for exempted goods. The Tribunal found that the appellant failed to comply with this requirement.

Issue 3: Applicability of Rule 6(3)
The appellant argued that Rule 6(3) requires the production of two final products, one dutiable and one exempted. The Tribunal rejected this argument, stating that the appellant manufactures Cement/Clinker (dutiable) and limestone (exempted), thus meeting the conditions of Rule 6(3). The demand raised under Rule 6(3)(i) was found to be legal and proper.

Issue 4: Limitation and Penalties
The appellant contended that the demand is time-barred and penalties are unwarranted. The Tribunal agreed that there was no suppression of facts and that the issue is interpretational. Therefore, the extended period for demand was not justified, and penalties were set aside. The appellant is liable to pay duty along with interest for the normal period only.

Conclusion:
The Tribunal upheld the demand and interest for the normal period but set aside the penalties. The appeal was partly allowed with consequential reliefs.