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TMI Blog2017 (10) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - E/20779/2015-SM - Final Order No. 22329 / 2017 - Dated:- 28-9-2017 - Shri M. V. Ravindran, Judicial Member Mr. V. Raghuraman, Advocate For the Appellant Mrs. Kavitha Podwal, AR For the Respondent ORDER Per : M. V. Ravindran This appeal is directed against Order-in-Original No.1/2015 dated 9.1.2015. 2. The relevant facts that arise for consideration are appellant herein was issued a show-cause notice dated 6.8.2014 directing to show-cause as to why Central Excise duty of ₹ 53,33,308/- be not demanded on the point of reversal of CENVAT credit of the clearances of Neem Oil, De-oiled Cake, Husk and Spent Meal and further, demand of Central Excise of ₹ 19,80,149/- as duty on one of the products due to change in classification for the period April 2009 to September 2013. The said show-cause notice alleged that CENVAT reversal on the intermediary/finished products/by-products is necessitated as appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of fungicides and pesticides and also sells the Neem Oil. He submits that Neem Oil, De-oiled cake and Husk, which arises during the extraction of the Neem Extracts, are also sold. He would submit that the emergence of Neem Oil from which Neem Extracts is taken out is an inevitable technological requirement during the course of manufacturing of final products like the Econeem, Econeem Plus, Neem 1500, Ecotin and Tricure. He would submit that appellant had availed the CENVAT credit of various inputs and more specifically solvent which is only used for the purposes extracting Neem Extracts from the Neem Seeds cannot be disputed and emergence of Neem Oil is technologically inevitable product and cannot be considered as finished goods or by-product. It is his submission that the adjudicating authority has held that these products as manufactured products only as per the definition of Excisable Goods as provided in Section 2(f) of the Central Excise Act, 1944 read with Rule 2(d) of CENVAT Credit Rules which defines exempted goods. He would rely upon the judgment of the apex court in the cases of Hindustan Zinc Ltd.: 2014 (303) ELT 321 (SC); DSCL Sugar Ltd.: 2015 (322 ELT 769 and the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are manufacturing dutiable products which are insecticides and fungicides and are discharging appropriate Central Excise duty on these products; they are availing benefit of CENVAT credit of the inputs used in manufacturing these products; the process of manufacture as explained is also accepted by the adjudicating authority. 5.1 As regards the confirmation of demand of ₹ 1,65,264/- on the Neem Extracts due to change in classification for the period April 2009 to March 2010, appellant is not disputing the same and has discharged the entire demand along with interest; hence to that extent, the impugned order is upheld. As regards the penalty imposed by the adjudicating authority on this point, I find 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. Accordingly, penalty imposed on this point is set aside. 5.2 As regards the demand of reversal of an amount equivalent to 5% or 6% of the value of the exempted goods cleared like Neem Oil, De-oiled cake, Husk and Spent Meal, I find that the adjudicating auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id the duty demand of 8% on exempted tyres. But when we find that in the case of the respondents, it is not as though some quantity of zinc ore concentrate has gone into the production of sulphuric acid, applicability of Rule 57CC can be attracted. As pointed out above, the entire quantity of zinc has indeed been used in the production of zinc and no part can be traced in the sulphuric acid. It is for this reason, the respondents maintained the inventory of zinc concentrate for the production of zinc and we agree with the submission of the respondents that there was no necessity and indeed it is impossible, to maintain separate records for zinc concentrate used in the production of sulphuric acid. We, therefore, agree with the High Court that the requirements of 57CC were fully met in the way in which the Respondent was maintaining records and inventory and the mischief of recovery of 8% under Rule 57CC on exempted sulphuric acid is not attracted. 21. As already pointed out, argument of the learned Solicitor General was that Rule 57CC and Rule 6 of the Modvat/Cenvat Rules respectively require the literal rule of interpretation which needs to be applied, as the language of thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... squarely applicable. 5.3 An identical view is expressed by the Hon ble High Court of Madras in the case of EID Parry (I) Ltd. (supra) in paragraph 19, which is reproduced herein below: 19. But on the other hand, the facts of the present case is in converse. Here, the cenvat credited inputs were, in fact, used in the manufacture of excisable products and thereafter during the course of such manufacture, two inevitable wastes emerged which are combined together to manufacture an exempted final product. Therefore, the stage at which the inputs were used is very crucial and relevant for consideration as to whether Rule 57CC is applicable to the facts of particular case or not. As we have already found in this case that the inputs were used only one time that too during the course of manufacture of final product viz., sugar, molasses and Denatured Ethyl Alcohol and that the consequent emergence of inevitable wastes are subjected to certain treatment to manufacture exempted final product viz., bio-compost fertiliser, the facts of the present case are totally different and distinguishable with the facts of the case in Solaris Chemtech Limited and the above decision is not applica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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