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TMI Blog2013 (3) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the provisions of Rule 6(3) of CENVAT Credit Rules, 2004. As regards Revenue’s claim that provisions of Rule 6(1) of CENVAT Credit Rules, 2004, will apply, we find that the said provision very clearly talk about the manufacture of exempted goods and there is no mention or indication that such exempted goods should be only considered as main product and the byproduct if any, cannot be a final product. - impugned order is incorrect and unsustainable - Decided in favor of assessee. - E/1355/2010 - A/46/2012-EX(BR)(PB) - Dated:- 16-1-2012 - Dr. C. Satapathy, Shri M.V. Ravindran, JJ. REPRESENTED BY : Shri Rupendra Singh, Advocate, for the Appellant. Shri B.K. Singh, Jt. CDR, for the Respondent. [Order per : M.V. Ravindran, Member (J)]. This appeal is directed against OIO No. 04/D-1/2010, dated 3-3-2010. 2. The relevant facts that arise for consideration are that the appellants herein are manufacturer of Menthol Crystals (BP/USP Grade), Menthol Powder and Peppermint Oil classifiable under Chapter Heading/Sub-heading No. 2906.10 and 3301.10 and after 8 digit code, tariff was introduced and classified them under appropriate heading. The appellant was avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such as Peppermint Oil, Menthone, Terpenes etc. It is his submission that common manufacturing process is admitted fact and outcome of two different final products is also admitted by both sides. It is his submission that during the relevant period, the appellant was following the provisions of Rule 6(3) of CENVAT Credit Rules, 2004 and was paying 10% of the value of the exempted final product at the time of clearance from the factory. It is his submission that if this is accepted, there is no reason for reversing an amount of CENVAT Credit lying in balance as on 31-3-2008 when Menthol Crystals were exempted from payment of duty, does not arise. It is his submission that the adjudicating authority has erred in coming to the conclusion that entire raw materials were used for manufacture of exempted final product. It is his submission that in the decision of Sharp Menthol India Ltd. (unreported decision of Hon ble High Court of Bombay) [Since reported in 2011 (270) E.L.T. 212 (Bom.)], it is very clearly held that Menthol Crystals and Peppermint Oil are two different final products and the assessees have rightly followed the provisions of Rule 6 of CENVAT Credit Rules, 2004. He would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in this case for the simple reason that there is no evidence to suggest that the appellants were paying duty @ 10% on the exempted goods including the goods which were being exported. He would submit that Rule 11(3) cannot have precedent over the Rule 6 is the argument of the assessee, which is erroneous for the reason that provisions of Rule 11(3) are directly related to Rule 3 of CENVAT Credit Rules, 2004, which necessitates the reversal of credit in respect of inputs to be used in the manufacture of exempted product. He would submit that after retrospective amendment to Rule 6, if there are different final products, the proportional reversal of credit on inputs used/to be used in the manufacture of Menthol Crystals should be considered. It is his submission that the reliance placed on the decision of Hon ble High Court of Bombay in the Writ Petition of Sharp Menthol India Ltd. is totally misplaced. It is his submission that the provision of Rule 11(3) has to be interpreted as to give some meaning to phrase a final product and if any final product is exempted, the said rule has to be applied as held by the Hon ble Apex Court in the case of Maruti Suzuki - 2009 (240) E.L.T. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 29061100 and Dementholised oil (DMO) containing menthol content 38.4% approx. falling under Chapter Heading 33012590 in 180 kg. Drums. Both the inputs are heated, to convert them into liquid and are blended in big tanks in 85% and 15% ratio respectively or as per congealing requirement. The solution of both the inputs is repeatedly filtered to remove unwanted impurities insoluble material and filtered solution is thereafter loaded in cans in the crystallization chambers. Before putting the prepared solution in crystallization chambers the crystals (small pieces taken out during the sieving of menthol crystals) are added to improve the percentage purity. In crystallization chambers, the temperature is controlled from +320 C to -10 C and the seeding with catalyst is done on the third day of the commencement of crystallization process. The solution containing menthol contents above 99% takes 15-25 days to set converted into crystals and the same is removed from the chambers in brick form. These bricks are manually broken in small pieces are centrifuged with the help of centrifuging machine to remove the un-crystallised solution which is called residue. The centrifuged crystals are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Peppermint oil would establish that the notice intended to treat peppermint oil as a final product and department is duly collecting Excise duty in respect of the Peppermint oil and it cannot be treated as an unintended product but ought to be treated as their manufactured product. I find that here in the instant case, the question under consideration is not of collection and excisability of the bye-product but the question here is whether the exempted goods are produced independently and dutiable products in question were obtained through an independent process or not and that is the crucial factor for deciding the issue of wrong availment of Cenvat Credit on the inputs used in the manufacture of exempted products i.e. Menthol Crystals exclusively. I find that there is no dispute that some of the products were excisable and dutiable but the question raised by the department was that the said dutiable products were not produced independently through a separate process of manufacture and were only un-intended bye-products obtained from the residual material left after the manufacture of exempted goods. In view of the process of manufacture discussed in the Para 17, it is very much ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of exempted goods or services and take CENVAT credit only on that quantity of input or input service which is intended for use in the manufacture of dutiable goods or in providing output service on which service tax is payable. (3) Notwithstanding anything contained in sub-rules (1) and (2), the manufacturer of goods or the provider of output service, opting not to maintain separate accounts, shall follow either of the following options, as applicable to him, namely :- (i) the manufacturer of goods shall pay an amount equal to five per cent. of value of the exempted goods and the provider of output service shall pay an amount equal to six per cent. of value of the exempted services; or (ii) the manufacturer of goods or the provider of output service shall pay an amount equivalent to the CENVAT credit attributable to inputs and input services used in, or in relation to, the manufacture of exempted goods or for provision of exempted services subject to the conditions and procedure specified in sub-rule (3A). Explanation I. - If the manufacturer of goods or the provider of output service, avails any of the option under this sub-rule, he shall exercise such option f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the preceding financial year, F denotes total value of taxable and exempted services provided, and total value of dutiable and exempted goods manufactured and removed, during the preceding financial year, and G denotes total CENVAT credit taken on input services during the month; (c) the manufacturer of goods or the provider of output service, shall determine finally the amount of CENVAT credit attributable to exempted goods and exempted services for the whole financial year in the following manner, namely :- (i) the amount of CENVAT credit attributable to inputs used in or in relation to manufacture of exempted goods, on the basis of total quantity of inputs used in or in relation to manufacture of said exempted goods, denoted as H; (ii) the amount of CENVAT credit attributable to inputs used for provision of exempted services = (J/K) multiplied by L, where J denotes the total value of exempted services provided during the financial year, K denotes the total value of dutiable goods manufactured and removed plus the total value of taxable services provided plus the total value of exempted services provided, during the financial year and L denotes total CENVAT cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per condition (e), and (v) credit taken on account of excess payment, if any, determined as per condition (f); (h) where the amount equivalent to CENVAT credit attributable to exempted goods or exempted services cannot be determined provisionally, as prescribed in condition (b), due to reasons that no dutiable goods were manufactured and no taxable service was provided in the preceding financial year, then the manufacturer of goods or the provider of output service is not required to determine and pay such amount provisionally for each month, but shall determine the CENVAT credit attributable to exempted goods or exempted services for the whole year as prescribed in condition (c) and pay the amount so calculated on or before 30th June of the succeeding financial year. (i) where the amount determined under condition (h) is not paid within the said due date, i.e., the 30th June, the manufacturer of goods or the provider of output service shall, in addition to the said amount. be liable to pay interest at the rate of twenty four per cent, per annum from the due date till the date of payment. Explanation I. - Value for the purpose of sub-rules (3) and (3A) sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Government of India in the Ministry of Finance (Department of Revenue) No. 108/95-Central Excise, dated the 28th August, 1995, number G. S R. 602 (E), dated the 28th August, 1995; or (v) cleared for export under bond in terms of the provisions of the Central Excise Rules, 2002; or (vi) gold or silver falling within Chapter 71 of the said First Schedule, arising in the course of manufacture of copper or zinc by smelting; or (vii) all goods which are exempt from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under sub-section (1) of section 3 of the said Customs Tariff Act when imported into India and are supplied,- (a) against International Competitive Bidding; or (b) to a power project from which power supply has been tied up through tariff based competitive bidding; or (c) to a power project awarded to a developer through tariff based competitive bidding in terms of Notification No. 6/2006-Central Excise, dated the 1st March, 2006. 12. We are concerned with the provisions of Rule 6(1) on which the Revenue is relying upon to direct the appellant to reve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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